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

[bushmocker]

Oh to be a fly on wall and see what the personal portfolios of Bush,Cheney,Rove,Libby etc.have gained in the last seven years.I Bet if you looked at those numbers you would never suspect any recession was at hand.

[Tom95134]

Bush is just going to try to use this to push Congress to make perminent his give-away tax cuts to the wealthy and oil companies.

Congres's answer should be, "F&%K You Bush, and the horse you rode in on!"

[EyeballKid]

Hey!! What ever happened to the free marketplace???

Why isn't the GOP insisting on the "magic of the marketplace" to correct the economic troubles we're having? Isn't this infusion of cash by BIG GOVERNMENT just what socialists and commies would do?

Where are you now, Fred Thompson? How about a little "free market" rhetoric, Karl? Tell us that this economic stimulus package is nothing but INTERFERENCE in the free flow of capital?

Besides that, WHERE'S THE MONEY coming from? Are we all aware that we're borrowing money from China and Japan to pay for nearly everything, including the middle-east wars? And we're throwing 120 billion toward the consumer so that they can spend it, while we can barely cover the payment of the interest on our current debts? What is that?

Of course, what this all indicates is that the US is economically, politically, and morally bankrupt. There is no medium or long term plan to strengthen the economy, which will proceed to flow into the sewer once the 300 dollar-per-person giveway is spent. And I believe that, this time, the common person fully understands this. The giveaway will do nothing to manufacture good paying jobs, and will not even buy 2 weeks' worth of health insurance for most people.

It's a sham and a scam. And I think that most of us know it.

[msmaggie]

Well there is some satisfaction, albeit small, in noting that Bush has lost his smirk. I guess even this dim bulb has started to realize that his policies and politics (which always trumped policy, his main problem) have led to his party being well on the road to losing the WH and a bigger share of Congress and several governorships, an intractable Iraq, and for the first time since national polling on these issues began, the majority of the country saying they don't see a better life for their children than their own lives. (And how profoundly sad is that??)

Why in the name of God did anyone think this small little man of little accomplishment he could rightly call his own, was fit to be POTUS. Beyond belief.

[ripples]

just wait until the unsecured credit crisis freight train hits, gonna make the sub prime problem look like a small speed bump..the first thing congress ought to do is set a reasonable credit card interest rate ceiling..the current usury rate allowed by South Dakota is nothing short of criminal

[Viper]

The only thing that will fix this problem is to admit that the policies of the last 30 years... Free trade/outsourcsing are a failure.

30 years ago we made stuff and when you got a college degree in the sciences you could get a job in that field. Today MFG is down from 32 percent of our economy to just six percent. Huge trade deficits which proudce huge budget deficits. As we cried free trade we went from largest creditor nation to largest debtor naton.

If free trade was good for us, we would be making more stuff not less and have a trade surplus. Today's college graduates only 1 in 4 finds a job in their discipline as we outsource the high tech/high skill jobs out to 50 cent/hour countries.

We must realize true strength is being number one in MFG, in a strong middeclass, not just a strong military.

We now punish the working man but greatly reward the paper exchangers on Wallstreet who make nothing.

We need to get back to fair trade and have a massive plan to return to MFG in the U.S., before the Communist Chinese unlink from the Dollar and your cheap Wallmart prices triple. We need tarriffs increased against countries such as China that charge us a 22.5% tarriff; where their government gets a 50% interest in any company that does business there such as Boeing while we charge them just 2.5%..

We need a two tier corporate tax structure. A very low rate for U.S. sales that result from U.S. MFG/Labor and a much higher rate for sales that result from MFG in countries where their wages are less than half than ours.

We need Medicare for all, so our healthcare is not 3 times our competitors costs.

We need massive energy projects and with the steps above, the products we design here will be built here, unlike computers, DVDs, cell phones, etc.

McCain wants to retrain people for jobs that dont exist; Let the race to the bottom continue.

Regards

[gappytoofcondi]

His approach to ANYTHING is the same- stay the course, regardless of how poorly that strategy may be. The perverbial round peg in a square hole. It must have killed him to admit that the economy is performing so poorly right after he publically stated that things were purring along. If we are looking for Bush to come up with workable solutions, WE ARE DOOMED!
The reporting of this recession by thie MSM is SOOOO behind the curve. Intelligent citizens are well aware of the difficulties they have in paying their bills. The salvation for them will be to get their personal financial houses in order. Pay down all high interest debt. Forgo large purchase obliagions. Start learning how to save money, wherever possible. Hopefully, those suggestions have been implemented long ago. Otherwise, overextending themselves with a larger lifestyle than they can really afford will come back to haunt them. It works the same for individuals as the government or any business.
The government should never be considered as a source of salvation for anyone. To survive, one must never look for help from anyone- be self sufficient. It has been that way regardless of which political party is in power. The GOP are more notorious for their fiscal policies which favcr the rich and let everyone else fall into the ditch. Nixon, Reagan, Bush 41 and now Bush 43 have a undeniable history, while Carter was also a disaster.

[Wilburrr]

the economy is not in the tank. Bush needs to do what Reagan did.... pull housing out of the equation. Change the equation? NO PROBLEMS!

[OkieMon]

BushWacky is 110% responsible for tanking the economy with his planned increase in oil from 20 bucks when he was elected to 100 bucks now. Why is this idiot even around to make these phony attempts to further line the pockets of his neofascist mafia?

[Wrong2bRight]

Fascism will come to us in the form of a government helpful hand.... a bail out for the bad (free will) decisions of individuals.

We need to end the market system all together. You can't be a liberal and a capitalist. The liberal thing to do is end the notion of personal property.

[plages]

Its never to little or to late for the greedy corporate pimps, is it! So how much do we now owe to India, and China, and how much will we owe in the next 10 years? This administration is using our credit card, to flush US down the toilet!

[osage]

The only way someone can defend this wholly destructive moron is to be a moron too.

[konchster]

Hey America feel like a bunch of boneheads waiting for The Idiot-in-Chief to come up with the winning game plan It appears that what got us into this fucking mess is what is going to get us out. print more money. Makes perfect sense to me (NOT)

[redondoron]

Why should Bush care? he has been saying all along how strong our economy is.
Why should he care? he was born with a silver spoon up his ass.
Why should he care? He will soon be taken up in the rapture.
Why should he care? He never before has let facts get in the way of his ideology.

[osage]

Too stupid too long.....too corrupt too deeply......too greedy too often......too ignorant, arrogant and faith-based to face reality......too much "The Decider" guy and too little listening to the experts......too bad for American's having too incompetent a president to function effectively in a job he's far too out of his depth to understand.