Wall Street Draws Little Comfort From Bush Stimulus Plan

NEW YORK — Wall Street ended a painful week with another decline Friday as skittish investors unable to hold on to much optimism about the economy drew little comfort from President Bush's stimulus plan.

The day's trading reflected how fractious Wall Street has been in the new year. Investors pulled back from a big early advance, with the major indexes trading mixed as Bush began to speak. By the time the president finished announcing a plan for about $145 billion worth of tax relief, the indexes were well into negative territory.

"It's disappointed in the size of the economic growth package. Wall Street's showing its displeasure," said Kim Caughey, equity research analyst at Fort Pitt Capital Group in Pittsburgh. "Honestly, I think the institutional investors understand the limits to the government's ability to enact economic change."

Coming after Bush's announcement, Friday's pullback made it clear that the stock market is in for a protracted period of uncertainty and continued declines. Investors have shrugged off all the positive signs they've received in recent days, including assurances last week from Federal Reserve Chairman Ben Bernanke that the Fed is ready to act aggressively _ which means a likely big interest rate cut later this month _ to help support an economy pummeled by devastation in the housing and credit markets.

Steven Goldman, chief market strategist at Weeden & Co., contends Wall Street remains concerned about whether other economic troubles are lurking.

"It's a culmination of factors that have been in existence for a while _ it's the unknown," he said.

That uncertainty made for a turbulent week on Wall Street. While it began optimistically, with the Dow Jones industrials surging 172 points on hopes that perhaps the worst of the housing and mortgage crisis might be over, deepening pessimism led to a 277-point plunge Tuesday and a 307-point slide on Thursday.

For the week, the Dow and the Nasdaq composite index lost 4 percent, while the Standard & Poor's 500 gave up 5.4 percent. In the 13 trading sessions of the 2008, the Dow has lost nearly 9 percent, while the S&P has fallen 9.75 percent and the Nasdaq nearly 12 percent.

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The market will likely need a long string of upbeat economic and corporate reports before it can regain its footing _ and with the economy clearly weak right now, it is likely to be a while before that kind of data becomes available.

On Friday, the Dow, which was up more than 180 points early in the session, fell 59.91, or 0.49 percent, to 12,099.30.

The broader S&P 500 index fell 8.06, or 0.60 percent, to 1,325.19, while the technology-focused Nasdaq dropped 6.88, or 0.29 percent, to 2,340.02.

The week's sell-off left the Dow and the S&P 500 well below their October highs _ which had the Dow at a record trading high of 14,198.09. The Dow has fallen more than 2,000 points, or 14.6 percent, while the S&P 500 is down nearly 240 points, or 15.3 percent.

Disappointment with Bush's plan came as investors were searching for those companies that might be weathering the economic slowdown well.

Some are indeed doing better than expected _ like International Business Machines Corp., which told Wall Street late Thursday to raise its 2008 profit estimates for the tech company, and General Electric Co., which posted a fourth-quarter profit rise Friday.

But many others are struggling. Washington Mutual Inc. reported a steep loss late Thursday for the fourth quarter, as Citigroup Inc. and Merrill Lynch did earlier in the week. With the banking industry trying to fix its shrinking portfolios and preparing for more distress in consumer debt, the economy may only have the government to fall back on _ and Wall Street didn't hear as much as it wanted from Bush.

In addition, many investors have been hoping that the Federal Reserve would put in place an intra-meeting rate cut before the central bank's next monetary policy meeting Jan. 29-30. "The market is saying to the Fed: we want a rate cut and we want it now. The fact that it is not getting a rate cut is causing a lot of selling that is feeding on itself," said Peter Cardillo, chief market economist at Avalon Partners.

Government bond prices slipped. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was unchanged at 3.63 percent.

On Thursday, a dismal reading on the Philadelphia Fed's manufacturing index and ratings agency downgrades of bond insurers sent the market tumbling. On Friday, a Bank of America Corp. analyst cut its ratings on three bond insurers _ MBIA Inc., Ambac Financial Group and Security Capital Assurance Ltd. _ to "neutral" from "buy."

MBIA fell 67 cents, or 7 percent, to $8.55 after a sharp drop Thursday.

Ambac rebounded from Thursday's drop, though, rising 34 cents, or 5.5 percent, to $6.58. The company said Friday it will ditch its previous plan to raise $1 billion in capital, a decision many investors considered an ill-advised move to maintain its ratings.

Security Capital Assurance fell 17 cents, or 9.3 percent, to $1.65.

A better-than-expected reading on consumer sentiment came as a pleasant surprise to investors Friday, but ultimately did not help Wall Street save its early advance. The University of Michigan's index, which most economists expected show a decline for mid-January, rose instead. Though not a perfect predictor of consumer spending, the report gave Wall Street some hope that Americans' buying might not drop off too precipitously amid worries about a recession.

The dollar rose against most major currencies, while gold slipped.

Crude oil futures rose 44 cents to settle at $90.57 a barrel on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies fell 7.39, or 1.09 percent, to 673.18.

Meanwhile, chip maker Advanced Micro Devices Inc. late Thursday said its fourth-quarter net loss widened, but the loss was smaller than Wall Street predicted. AMD surged 73 cents, or 11.5 percent, to $7.07.

IBM rose $2.30, or 2.3 percent, to $103.40 on its strong forecast.

Washington Mutual rose $1.09, or 8.8 percent, to $13.55. Many investors, in anticipation of an even bigger fourth-quarter loss, had driven the savings and loan's stock sharply lower Thursday.

In overseas trade, Japan's Nikkei stock index rose 0.56 percent and Hong Kong's Hang Seng index advanced 0.35 percent. In Europe, London's FTSE 100 finished down 0.01 percent, Frankfurt's DAX fell 1.34 percent and Paris' CAC fell 1.25 percent.

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On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

Comments

[BowlingForRevenge]

REPUBLICAN history repeating itself....and of course the next President will be blamed for the present administrations rape of the treasury.
Those who don't remember (or retain) are doomed to repeat history...and we know what long & short term memory problems "W" has.
**********­**********­**********­**********­****
January 27, 2003
Fact v. Fiction: Tax Rebates
by Norbert Michel
WebMemo #192

Fiction: A small rebate or a refund to the American people will prompt renewed consumer spending leading to a revived manufacturing sector and US economy.These $300 rebates will be of particular importance to lower income Americans and promptly spent by them.This is the type of stimulus the economy needs: more consumer spending.

Fact: Consumers see tax rebates as transitory, they do very little to help the economy, and they generate little consumer spending.

A previous study appears to bolster this theory.A survey, conducted by professors Joel Slemrod and Matthew Shapiro of Michigan University, examined what recipients expected to do with the rebates they received under President Bush’s 2001 tax relief plan.This plan provided rebates of up to $300 for individuals and up to $600 for married couples.

Former President Gerald Ford’s administration tried to “stimulate the economy” in 1975 by giving every American a tax rebate.This plan’s failure caused the Carter administration to withdraw a similar proposal in 1977.

The rebate idea has been tried and tried again and each time it has failed in its purpose.This idea should be tossed on the ash heap of discredited ideas with the rest of the outdated New Deal era economic principles.

Individuals of all income levels understand that tax rebates do nothing to change the long-term outlook for their personal budgets.For example, when someone is unsure about his or her job-stability, a one-time tax rebate does nothing to change that insecurity.Marginal tax rate cuts allow individuals to keep more of the next dollar they earn and permit taxpayers to make the crucial, long-term work and investment decisions that fuel solid expansion of the economic activity.http://www.otpr.org.

[lungfish]

Somebody tell me how this bozo and his minions who created this mess to begin with is qualified to fix it? Of course its too little too late, these guys aren't successful businessmen. They are crooks and liars, what do they know about doing anything correctly and effectively and doing it all above board?

[schoolmaster]

It does not work.

[escobar]

The very ones who ruined the USA are going to do more harm sending us down the same dark road at an even higher rate.
Thier plan of globalization and privitization simply did not work, except that it made the rich richer.

[LITU]

Two books that put the Bush Administration in perspective:

"Confessions of an Economic Hit Man", and "Shock Doctrine, the Rise of Disaster Capitalism".

Once you've read them, it all comes together.

[kasinca]

If Dubya, the dumb ass, knew how to fix the economy, he would never have screwed it up in the first place. All he is doing is talking about giving phoney money to those he as screwed the most so they can spend it for the cronies he has helped the most. Dubya is the worst thing to ever happen to this country and the sad thing is that there are morons who think he is good. Home schooling isn't what it is cracked up to be...obviously.

[pros54]

We are the foremost weapons supplier to the world and it is high profit business unfortunately only so few countries are in the business of invading other countries we are presently the only invaders of other countries. Some who might be interested in that business we are not keen on selling to since the weapons can be turned against us or given to Al Qeda. So there goes our super speciality and why we cannot compete.

[LITU]

First of all, anyone willing to give Bush credit for this new tax strategy haven't been paying attention. Bush is a conniving, narcissistic idiot, but underneath all that, he's just a stupid fucker. The man is so lacking in plans he has to have an instruction manual to wipe his ass.

No, the REAL people behind the strategy are those that I've mentioned earlier, the Chicago School of Economics boys and girls; the ones in the back rooms. Everything is going according to plan.

[LITU]

Bush, and every other bastard in his cabinet, is an adherent of the Chicago School of Economics model of disaster capitalism. It's disciples are hidden away in minor posts, unaccountable to anyone, while its wheels continue to turn. Every single thing this admin does is in accordance with the models promulgated over the past forty years.

[insanityfollows]

We're going down by the head and don't have enough lifeboats? Oh, well. I'll at least pretend to take charge and tell everyone to go get in them. It's too late to tell them the part about not having enough of them. They might panic or something, and then where would we be? Maybe the Saudis have a boat nearby...

[ajax2]

Since Bush has no intent to pay for the stimulus it's free. Why not $10,000 instead of $300?

[GH]

Too Little Too Late?

So what was the Democrats plan during 2000, for a collapsing economy? By the time Bush took his seat in the WH; gasoline prices were up 56% over 12 months; the historic NASDAQ had crashed - down 58%; The broad stock market high was over 3 years prior; almost every single economic indicator was dropping to the south pole, including GDP, employment, manufactoring, etc.; CA was in the midst of a 9 month old energy crisis; the DR Congo would make Darfur look like a family picknic; corporate and accounting fraud and corruption was rampant; Enron had been empowered by Clinton for way too many years; Clitnon's old friends and associates, James Riady and gang were soon to be sentenced; the ongoing planning for 9/11 was in it's final stages; and what did the Democrats want? Daschle, Kucinich, Lieberman were proposing a tax rebate (Corzine wanted Corporate Dividend tax reductions).

Too little? Well, Bush is proposing a heck of a lot more than the $300 that the Dem's wanted back then.

Too late: And he is out in front this time. Unlike 2000 - 2001 when GDP had already been inlong decline, GDP growth has been on the rise recently (I understand it won't be any longer).

The big question is: Will this bubble burst (more R/E this time) be as bad as the dot.com bubble burst as 2000? In other words, will millions of people loose their jobs, their health insurance, their life savings? Will almost a $trillion in tax revenue losses (ie., the silly projected surplus) result in massive deficits (that was before the Bush tax cuts and the Iraq war costs, folks)?

[mamacat]

On the subject of stimulus plans coming from the Federal government:
I just read an article relating to the development of plug-in hybrid vehicles, as a way to reduce our use of petroleum products. It stated that the Federal gov't is going to promote the project with a grant of $30 million! Oh my gosh! The feds are currently spending about $13 million every hour to occupy Iraq, and they are bragging that they are going to take less than 2 and 1/2 hours worth of the Iraq war funding and use it to do something to actually help the United States! How shocking! How amazing! How ludicrous.
If the neo-cons hadn't blocked the recent effort by Dems to switch the $13 billion in grants that the Republicans gave away to the oil industry, to grants to develop renewables, they might actually have something to be proud of. As it is, the public is left holding the bag, once again.
Thanks Bush, thanks Cheney, thanks Republicans, thanks K street,..... This administration is so crooked, its amazing they are able to reproduce.

[Boobaloo]

That spoiled rich brat thinks throwing money at a problem will make it go away.

There is no way to avoid this coming recession.

Every single economic indicator is crashing, from housing to mortgages to investor confidence to high debt to stagnant wages to high inflation etc.

The core problem with this country economically is: greed, consumerism & spending money we dont have.

All of these problems will be here in ten years when we dig ourselves out of this hole and we'll sink ourselves again.

[WilliamWallace]

He really needs to implement a Cranial Stimulus Package for himself, something with plenty of pictures.

Maybe we need to get the next, less pathetic Congress to implement shorter Presidential terms?