Stocks End Little Changed on Worries About Economy

NEW YORK — Investors took scant comfort Wednesday from the government's plans to revive the housing market and overall economy.

Wall Street ended with only modest changes after a steep sell-off Tuesday on worries about the global economy and banks in Eastern Europe. Several attempts to rally unraveled Wednesday as market indicators hovered around the lows they marked in November.

Investors reacted coolly to a $75 billion mortgage relief plan President Barack Obama introduced on Wednesday, which would provide incentives to mortgage lenders to help borrowers reduce their payments.

Plunging home values are at the center of the 14-month-old recession, which has been one of the most severe in decades. The announcement came a day after Obama signed into law a $787 billion economic stimulus plan.

"I think the general consensus is the Fed, the Treasury, the government just can't seem to get out ahead of this," said Harry Rady, chief executive at Rady Asset Management in La Jolla, Calif., referring to the Federal Reserve and other agencies. "Whatever they do is already discounted and expected by the market. What we saw today was just kind of a big yawn."

The Dow Jones industrial average edged up 3.03, or less than 0.1 percent, to 7,555.63. For a second day, the blue chips managed to finish just above their November closing low.

Broader stock indicators slipped. The Standard & Poor's 500 index fell 0.75, or 0.1 percent, to 788.42, and the Nasdaq composite index fell 2.69, or 0.2 percent, to 1,467.97.

The Russell 2000 index of smaller companies fell 5.72, or 1.3 percent, to 423.18.

Declining issues outnumbered advancers by about 5 to 2 on the New York Stock Exchange. Consolidated trading volume came to a light 5.65 billion shares compared with 5.78 billion shares traded Tuesday.

Investors' caution Wednesday follows another round of downbeat news about the economy. The government said construction of homes and apartments tumbled by 16.8 percent in January to a record low annual rate. Applications for building permits also dropped to a record low.

The government also said production at the nation's factories, mines and utilities fell a greater-than-expected 1.8 percent last month. It marked the third straight month in which production fell.

The Federal Reserve slashed its projections for the country's economic performance this year, predicting the economy will shrink this year. In its previous forecast, the Fed still held out the possibility of growth in 2009.

Fed Chairman Ben Bernanke reiterated Wednesday that he would do everything he could do to loosen the recession's grip on the economy.

But some investors remain skeptical of the government's ability to lift the economy.

"There's a huge lack of confidence in that stimulus package," said David Hefty, chief executive of Cornerstone Wealth Management in Auburn, Ind.

The Dow finished inches above its November low on Tuesday and Wednesday. On Tuesday, the blue chips tumbled 298 points, or 3.8 percent, to 7,552.60 — just above its Nov. 20 close of 7,552.29, which was its lowest finish since March 12, 2003.

The Dow and S&P remain above their Nov. 21 trading lows, an important psychological barrier for traders. For the Dow, 7,449.38 was the November trading low; for the S&P it was 741.02.

Jim Herrick, director of equity trading at Baird & Co. in Milwaukee, said the market will continue to fluctuate until investors get a sense of whether the economic stimulus and housing plans are working.

"We're going to have a lot of gyrations. There's a good chance that we'll retest the lows," he said.

Bond prices fell after jumping amid the slide in stocks Tuesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.75 percent from 2.65 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.30 percent from 0.29 percent late Tuesday.

The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude fell 31 cents to settle at $34.62 per barrel on the New York Mercantile Exchange.

Overseas, Britain's FTSE 100 fell 0.7 percent, Germany's DAX index lost 0.3 percent, and France's CAC-40 slipped less than 0.1 percent. Japan's Nikkei stock average fell 1.5 percent.

Copyright AP - Associated Press
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