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Stocks limped to the finish line Wednesday as broad strokes on the bank plan from Bernanke failed to comfort the market.
After a yo-yo session that had investors trying to digest some details of the Obama administration's housing plan, Federal Reserve Chairman Ben Bernanke trotted out with a vague hint against bank nationalization but few details about what investors are worried about: What's going to happen to banks.
>> Bank Nationalization: No Longer a Dirty Word
Wall Street wants details. It needs details. These crisis management 101 lessons are wearing thin. And stocks are sliding.
Stocks started the day at November levels, after sliding 4 percent on Tuesday and 5.3 percent last week.
The Dow Jones Industrial Average rose 3.03 points to close at 7,555.63, just a few points above its November closing low. (The November intraday low, however, is about 100 points lower.)
The S&P 500 lost three-quarters of a point to close at 788.42, while the Nasdaq dropped 2.69 points to end at 1,467.97.
The Obama administration hopes to help millions of homeowners teetering on the brink try to stave off foreclosure with a $75 billion "homeowner stability initiative." The plan would give homeowners an upfront fee for eligible modifications, additional payments for three years and monthly principal reduction for up to five years if they stay current on their mortgage payments.
As part of the plan, the Treasury Department will also double the amount of financial support it pumps into mortgage giants Fannie Mae and Freddie Mac.
Investors shrugged off a morning report that showed new home construction fell to a record low in January. Housing starts tumbled 16.8 percent to a 466,000 annual rate, following a 14.5-percent drop in December. Economists had expected a much milder drop to a 525,000 annual rate. Year over year, housing starts were down more than 50 percent from January 2008.
>> Foreclosures—Fair and Foul
>> Housing Numbers Are a Game-Changer
Building permits, a gauge of future activity, fell by 4.8 percent last month after an 11.1-percent drop in December.
Separate reports showed mortgage applications soared more than 45 percent last week, and in January, import prices fell 1.1 percent and industrial production dropped 1.8 percent.
The Fed slashed its outlook for 2009, projecting that the unemployment rate will rise to between 8.5 and 8.8 percent, and that the economy will contract between 0.5 and 1.3 percent.
Bank of America [BAC
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] was the biggest decliner on the Dow, followed by General Motors [GM
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] and Citigroup [C
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], all of which lost about 5 to 6 percent.
Shares of MBIA [MBI
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] jumped 30 percent after the bond insurer announced plans to split in two, with one half focused on guaranteeing U.S. municipal bonds. Investors cheered the move but S&P downgraded its credit rating on the company's main insurance unit to three steps above junk, saying the new division had "uncertain business prospects."
Goodyear Tire [GT
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] gained 6 percent after the tire maker reported a steeper-than-expected loss but announced a continued aggressive restructuring program aimed at cutting costs.
Comcast [CMCSA
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] slipped 4.1 percent after the cable provider reported its quarterly profit dropped 32 percent due to a writedown and a loss of subscribers. Earnings of 27 cents a share beat Wall Street estimates by a nickel.
But Deere [DE
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] missed profit estimates, and the world's largest maker for farm equipment also lowered its forecast for 2009. Its shares fell 3.8 percent.
European stocks declined, again dragged down by banks. Royal Bank of Scotland moved lower after a report that it would need $11 billion to protect its assets. Shares in Asia were also lower and Taiwan cut its key interest rate to a record low.
Alan Greenspan didn't add much optimism to the current situation with a speech on Tuesday. The former Federal Reserve chief said that the recession will be the longest and deepest since the 1930s and added that more TARP funds would be needed to stabilize the US banking system.
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Still to Come:
WEDNESDAY: Fed's Bernanke, Pianalto, Evans speak; Fed minutes; Earnings from HP and Analog Devices
THURSDAY: PPI; weekly jobless claims; leading indicators; Philly Fed survey; weekly oil inventories; Fed's Lockhart speaks
FRIDAY: CPI; Earnings from JCPenney and Lowe's
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