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

[Troubledwawa]

Headline: "Bush's Economic Stimulus Plan: Too Little Too Late".

Recently, I've read quite a few complaints about Huffpo's headlines, but this headline squarely hits the nail on the head.

$145 billion divided by 300 million American citizens comes out to about $483, each. Anything less than $483 per person pretty much means someone else is STILL in line before the American People. Without a major change, this "too little" stimulus is useless.

And it's "too late" as well. According to the Census Bureau raw data on housing starts (or permits issued), the peak nationwide was in May of 2007.

Our leaders knew something was up back then. A couple of months later, Bush's first bailout plan came and went through Congress that was intended for an estimated 80,000 people. Bush then said "no more".

A couple of months after that (November 07), another bailout was introduced by Bush that sailed through Congress, that focused on protecting overseas investors.

These two bailouts so far have removed some folks that were "STILL" in line for help before the American People, but haven't done squat to help the situation.

Now I think I know how the non elite classes must have felt like on the Titanic. Bush and Congress have gotten us in a fine mess i.e. another great depression. Heckovajob guys. Just think what the sum totals of the 3 bailouts would have done for us if properly enacted upon back in the first bailout. It's not like they didn't know something was up.

I can only speculate that Madame Speaker and Harry Reid are rethinking their "impeachment is off of the table" policy. They've been a little quiet as of late. So, I think I'll spend my rebate on Cindy Sheehan - http://www.cindyforcongress.org/article.php?id=58 . Just my way of saying "thanks" to Madame Speaker. Haven't forgotten about ya Harry - ;-D .

[rchwel]

Oh the good ol days George when you could blame Bill for all your screw ups !

[CheneysACoward]

Stimulus Plan?
Now Chimp after 7 years, is "The Viagra" of economy? Strange only two weeks ago Chimpy said there was no problem.

[brushfinch]

I forgot to add that Americans should look at labels, and avoid buying things that are made by slaves in the third world countries!!! Buy less and buy American made.

[davesideas]

Let me get this straight..­.our current fiscal problems are caused by excess debt...all types of debt...and Bush is suggesting going further into debt for a mommentary fix? Somebody stop this guy; we can't afford any more of his solutions.

[brushfinch]

the tax rebate proposed by the president seems to me no more than a bandaid on an hemorraging wound...Wh­ereas it is nice to think of the extra money it would rovide to American families, it will not solve the problem. We need a fundamental change in how we run our economy: no permanent tax cuts for the wealthy, no incentives for companies who are sending American jobs abroad so that they avoid paying American workers a decent salary, and no more spending on the Iraq war.The money we spend in Iraq would be better spent on repairing our ailing infrastructure, and decreasing our international debt. Americans need to be taught how to save, and not to constantly buy stuff on credit which they can ill afford, and credit card companies need to be reigned in in regard to the interest rates they charge...w­e do not need a bandaid, we need a long term, and solid treatment plan.

[VivaZapata]

it's not just too little, too late. you're crazy if $145 billion is too little. that's over $350,000 per citizen. that can draw a lot of water. think about it. how should the money be spent, not just to spark the economy in the short term so that more people will go out and buy guitar hero? how can all that money create a healthy sustainable economy? It's all about creation of decent jobs, increased education and fixing what's broken throughout the country. the continued weakening of the dollar is going to be crippling to old people and others on fixed incomes. it's cruel and will only exacerbate the difficulties we're now facing.

[scooperss]

Working hard to get those ratings up to what the WH predicted they would be when he left office.

[mamacat]

Maybe there are still a few people who think Bush knows what he is doing, but why? There are a lot of things that can be done to help the nation, but giving more tax breaks to the super-rich (and a few dribbles to everyone else) is not going to help the bottom 97% or so.

[StillAmused]

It's the beginning of the end when Junior's been abandoned by the robber barons.

[kfdan]

It's a good idea to realize that the elite banking system will benefit from all this economic turmoil just as they did in the crash of the 1920s. Bush and his neo-con cronies along with the rest of the elite banking cartel need to be put behind bars!

[ROBOT8]

WELCOME TO A 2 CLASS SYSTEM. A BANDAGE ON A NUCLEAR BLAST.
"If something comes along that is truly serious, truly serious, something like a nuclear weapon going off in an American city, or something like a major pandemic, you are going to see the ineptitude of this government in a way that will take you back to the Declaration of Independen­ce." -Lawrence Wilkerson, a chief of staff for then Secretary of State Colin Powell, on the [b]ush administration, which he said was run by a "cabal." 10/31/05 Newsweek
"If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, THE TRUTH IS THE GREATEST ENEMY OF THE STATE." -- Joseph Goebbels, German Minister of Propaganda, 1933-1945

[jimmyaj]

The picture of Bush, Cheney, and Paulson in the NY Times says it good: "We'll see if we can get $145 BN in tax cuts to help the economy... blah, blah."

Shit, they and their cronies just stole ten times that amount, if not more.

Those bastards should be hung in chains and left out to rot for years.

[Noelle]

I am very suspicious of The Fuhrer being so eager to give away money. He started a war shortly after the last batch of "tax rebates". It looked more like a bribe to me than tax relief.

[Coyote2]

This recession will create buying opportunities in New Energy and I am keeping my powder dry waiting.

Energy Scarcity ( the end of cheap energy) will cause market disruptions -major in the long term- but we may have to wait for a new administration with the gonads to encourage and subsidize change in America before we see these investments really take off.

olephart posted: “The whole exercise (energy independence) is predicated on the assumption that Republicans would not be involved. The Republican concept that 'government does not work' is proven each time they are allowed to operate it. Thus in the absence of Republicans all things become possible.”

Akeena Solar Inc. tripled in value in the last month on news of the licensing of their proprietary solar installation technology and currently is falling back to earlier values. STG-X is ready for a pop from penny stock status as they are into production with a unique low voltage inverter and sales look good. Look for their expected positive year end report within 2 weeks.

First Solar has had a roaring year (a buying opportunity presented with a recent $100 haircut?), as has Potash Corp in supplying fertilizer to ethanol producers. Ballard has sold off their revenue draining automotive fuel cell technology to focus on industrial fuel cell: will this cure investor fatigue and create a buying opportunity? SunPower (SPWR) has lost the last three months of gains and is tempting my powder. But I will hold off a bit longer, I think.