Stocks End Mixed as Investors Look to Washington

By SARA LEPRO and TIM PARADIS
|  Monday, Feb 9, 2009  |  Updated 6:07 PM EDT
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Stocks End Mixed as Investors Look to Washington

AP

The Senate is expected to pass an $827 billion economic stimulus bill on Tuesday. The government, however, still faces the challenge of reconciling the Senate bill with the House's $819 billion version.

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NEW YORK  — Investors are waiting for Washington to make the next move.

Stocks ended a quiet session with only modest changes Monday as Wall Street sought details of how the government will reshape a rescue plan for the financial industry. Investors are also watching as political leaders scramble to put together an economic stimulus program.

The market is awaiting a Tuesday speech by Treasury Secretary Timothy Geithner outlining President Barack Obama's plan to overhaul the government's $700 billion financial bailout package. Congress passed the measure last fall as the credit markets began to seize up on fears about rising levels of bad debt. Geithner had been scheduled to announce the plan Monday, but the White House pushed back the speech to focus on the stimulus bill.

The Senate is expected to pass an $827 billion stimulus bill on Tuesday. The government, however, still faces the challenge of reconciling the Senate bill with the House's $819 billion version that passed earlier. Republicans and Democrats have been at odds over the plan, which is designed to help pull the economy out of the worst recession in decades. The Obama administration is still pressing to have the stimulus measure on the president's desk for signing by the middle of this month.

Federal Reserve Chairman Ben Bernanke is also expected to testify Tuesday at a House Financial Services Committee hearing on the central bank's efforts to revive lending during the financial crisis.

Investors were hesitant to make big moves with so much news expected from Washington in the coming days.

"We saw a lot of buying ahead of the announcements," said Chris Johnson, president of Johnson Research Group. "Investors are simply biding their time to see if those expectations are going to be met."

The Dow Jones industrial average fell 9.72, or 0.12 percent, to 8,270.87. The blue chips fluctuated between gains and losses 49 times during the session.

Broader stock indicators were mixed after a big rally last week. The Standard & Poor's 500 index rose 1.29, or 0.15 percent, to 869.89, and the Nasdaq composite index slipped 0.15, or 0.01 percent, to 1,591.56.

The Russell 2000 index of smaller companies fell 2.76, or 0.59 percent, to 467.94.

Gainers outnumbered losers by about 8 to 7 on the New York Stock Exchange, where volume came to a light 1.26 billion shares.

On Friday, the market largely overlooked a horrible jobs report and rallied in anticipation of the stimulus bill and changes to the financial bailout. The Labor Department said U.S. employers slashed 598,000 jobs in January. That left the unemployment rate at 7.6 percent, the highest level since late 1992.

The Dow industrials ended last week up 3.5 percent, the S&P 500 index rose 5.2 percent and the Nasdaq posted a huge 7.8 percent gain.

"Given that we had a good two-day rally and a strong performance last week, it's not surprising that we would see some softness," said Alan Gayle, senior investment strategist at RidgeWorth Investments. "There is a tug of war between the problems that we know are in front of us and the promise that is expected between the bank rescue package and the stimulus plan."

Bond prices ended mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was unchanged at 2.99 percent from late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.32 percent from 0.27 percent late Friday.

The dollar was mixed against other major currencies. Gold prices fell.

Light, sweet crude fell 61 cents to settle at $39.56 a barrel on the New York Mercantile Exchange.

Johnson cautioned that stocks could give up some of their recent gains even if investors are pleased by changes to the financial rescue fund and if Washington is able to pass the stimulus package.

"If everyone is betting on it, the payout on the other side is going to continue to decline," he said, likening the market's recent rally on predictions of an improved economy to what happens when too many gamblers wager on the same horse.

Amid the anticipation over the government's plans there were stark reminders that an economic recovery is still far off.

Nissan Motor Co. said it will slash 20,000 jobs, or 8.5 percent of its global work force, over the next year to cope with what the Japanese automaker expects will be its first annual loss in nine years.

Meanwhile, Barclays PLC warned that further asset write-downs — on top of the massive $11.9 billion booked for 2008 — were likely and said executive directors would not be getting any bonuses. However, Britain's third-largest bank by assets said its 2008 net profit fell only 1 percent, boosted by last September's acquisition of part of failed investment bank Lehman Brothers Holdings Inc.

Financial stocks led the market higher ahead of the latest version of the Treasury Department financial rescue plan. Bank of America Corp. jumped 76 cents, or 12.4 percent, to $6.89, while General Electric Co. rose $1.54, or 13.9 percent, to $12.64. GE has a big finance arm.

Overseas, Britain's FTSE 100 rose 0.37 percent, Germany's DAX index rose 0.48 percent, and France's CAC-40 rose 0.39 percent. Japan's Nikkei stock average dropped 1.33 percent.

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