Thursday, February 19, 2009

US stocks flat despite government housing plan

US stocks ended flat on Wednesday in choppy trading as the market shrugged off government plans to stem housing mortgage foreclosures and restructuring programs unveiled by the auto industry.

The Dow Jones Industrial Average rose 3.03 points (0.04 percent) to 7,555.63 a day after sinking a whopping 3.79 percent to an almost three-month low level.

The tech-dominated Nasdaq was down 2.69 points (0.18 percent) to 1,467.97, while the broad-market Standard & Poor's 500 index dipped 0.75 point (0.10 percent) to 788.42.

"The market has been flirting today with important technical support levels," said Wachovia Securities chief market strategist Al Goldman.

Shares remained bearish a day after the rout on Tuesday on pessimism that President Barack Obama's nearly 800 billion dollar economic stimulus package may not be enough to bring the economy out of recession.

On Wednesday, the market shrugged off news of Obama's strategy to help millions of homeowners avoid foreclosure and stabilise the reeling real-estate sector, including 75 billion dollars for at-risk homeowners to help them keep their homes.

The US Treasury Department also announced on Wednesday a doubling of its financial support to troubled mortgage finance giants Fannie Mae and Freddie Mac, to 200 billion dollars each, in an effort to stabilise the real estate sector.

The news did little to stir a reaction among market participants, who continue to wait and see what other plans will be unveiled to help restore conditions in the housing market, financial sector, and broader economy, analysts at Briefing.com said.

They cited "bleak" economic data released on Wednesday.

Housing starts and building permits plunged again in January to new record 50-year lows amid the deepening recession, the Commerce Department reported.

"This is bad economic news that will factor negatively in the first-quarter GDP (gross domestic product) forecasts," said Patrick O'Hare of Briefing.com.

The government also reported on Wednesday that industrial production declined for the third consecutive month, by 1.8 percent in January, more than the 1.5 percent dip expected by the market.

"Today's report is not encouraging, as industrial production keeps decreasing, cuts in manufacturing production continued. We foresee no improvement in the short term," said Elsa Dargent of Natixis.

Experts at Schwab & Co said the fresh economic data was "doing little to stoke optimism."

Shares in US tire giant Goodyear Tire and Rubber rose 5.98 percent to 6.38 dollars after the company announced plans on Wednesday to cut 5,000 more jobs and to freeze salaries in 2009 after a fourth-quarter loss of 330 million dollars.

The job cuts come in addition to 4,000 eliminated in the second quarter of 2008, the company said.

Troubled automaker General Motors fell 5.50 percent to 2.06 dollars after the company and Chrysler said late Tuesday they would need billions of dollars more in government aid even as they announced job and production cuts as part of their restructuring plans.

Banks shares remained weak. Bank of America fell 6.73 percent to 4.57 dollars, Citigroup 4.90 percent to 2.91 dollars and JPMorgan Chase 0.65 percent to 21.51.

Bonds were down. The yield on the 10-year US Treasury bond rose to 2.728 percent from 2.662 percent on Tuesday while that on the 30-year bond rose to 3.525 percent from 3.486 percent. Bond yields and prices move in opposite directions.

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