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US stock market daily report (February 04, 2013, Monday)

February 5, 2013, Tuesday, 04:16 GMT | 23:16 EST | 08:46 IST | 11:16 SGT
Contributed by Millennium Traders


Standard & Poor’s Ratings Services could face alleging wrongdoing in its rating of mortgage bonds before the financial crisis erupted in 2008, as the U. S. Justice Department and state prosecutors intend to file civil charges. In lawsuits by federal and state officials, allegations are likely to be made as soon as this week. Should the lawsuits be filed, this would be the first federal enforcement action against a credit-rating firm for alleged illegal behavior related to the crisis. Several state attorneys general are expected to join the lawsuit. A unit of McGraw-Hill Companies, Inc. (MHP), S&P alleged wrongdoing centers on allegations related to the model they used to rate mortgage bonds.

European debt fears steered U.S. stocks lower for their worst day of 2013, guiding many investors into cashing in on positions. The Dow Jones Industrial Average ended the session on Monday, down over 129 points. Spanish Prime Minister Mariano Rajoy is mired in a corruption scandal amid calls for his resignation from the opposition Socialist Party. Over the weekend, Rajoy sought to contain a growing scandal as he denied allegations that he and members of his party accepted secret payments. In Italy, Italian Prime Minister Silvio Berlusconi promised to refund nearly 4 billion euros in property taxes if his party wins elections in the next three weeks.

A survey released by the Federal Reserve on Monday indicates banks maintain fairly tight lending standards while demand for business loans, mortgages and car loans continue to rise. Since the credit crunch, the average FICO score or credit rating of an approved mortgage has increased substantially, per reports. The January senior loan officer survey, from officers of 68 domestic banks and 22 foreign banks operating state-side, found that generally modest fractions of lenders made it easier to get loans over the last three months. The Fed survey reported domestic banks noted that standards for both prime and nontraditional mortgages remained generally unchanged, over the past three months. According to Fed data, outstanding mortgage debt at the end of Q3 was lower in excess of 10% - compared to 2008 levels. The senior loan officer survey found standards for auto loans eased and credit cards standards remained generally, unchanged. Aggressive competition played a part on the ease of standards for commercial and industrial lending. One-third of respondents that reportedly compete with European banks noted an increase in business to some extent. The Fed survey found that nearly 10% of domestic banks had tightened their standards toward banks in Europe.

The U.S. Treasury Department reported on Monday that the U.S. government expects to borrow $331 billion during Q1, $11 billion less than previously forecast in October. During Q4 2012, U.S. Treasury issued $297 billion in net marketable debt and ended with a cash balance of $93 billion. For Q2, U.S. Treasury projects borrowing of $103 billion with a cash balance of $60 billion. Treasury assumes an end-of-March cash balance of $30 billion, with the decrease due to a higher beginning-of-quarter cash balance.

The U.S. Commerce Department reported on Monday, orders for durable goods produced in U.S. factories rose 1.8% during December. Orders for nondurable goods - such as food and clothing - fell 0.3% and during November, factory orders were revised slightly lower to show a 0.3% decline.