- The Washington Times - Friday, February 13, 2009

UPDATED:

Wall Street closed sharply lower Friday after a brief fling with the upside when the White House announced that President Obama will release details Wednesday of a plan to help homeowners facing foreclosures.

The markets remained unmoved by House passage of the administration’s $787 billion spending-and-tax-cut economic stimulus package, apparently having already digested that as a foregone conclusion.

At the close, the Dow Jones Industrial Average dived 82.35, or 1.04 percent, to 7850.41. The tech-focused Nasdaq dropped 7.35, or 0.48 percent, to 1534.36. The broader Standard & Poor’s 500 fell 8.35, or 1 percent, to 826.84.

The price of a barrel of light, sweet crude oil soared swiftly to nearly $38 after spending most of the day at the mid-$35 level.

The markets slid sharply in the final minutes before the close, with financial stocks apparently leading the way. CNBC attributed the decline in part to short selling of financial stocks because of the banks’ displeasure with the lack of details about a possible plan for the government to buy their toxic assets.

Investors sell short in hopes a stock will go down, when they then buy it.

The red ink at the close capped a bad week for the markets in which the Dow dropped 5.2 percent and the Nasdaq fell 3.2 percent, CNBC said. But the S&P 500 rose 0.6 percent since the beginning of the month, it said. The upside midday flurry over the mortgage issue only briefly pulled Wall Street out of the doldrums.

The White House gave no hints about the content of the plan to assist homeowners with their mortgages even before they become delinquent in their payments. Money for it presumably would come from a $50 billion mortgage modification program that Treasury Secretary Tim Geithner mentioned Tuesday.

Investors seem to be hoping that the stimulus plan, which President Obama has said repeatedly will save or create 3 million or 4 million jobs, will have some immediate effect on the declining economy, the worst downturn in more than 70 years with at least 3.6 million people out of work.

Sen. Bob Menendez, Democrat New Jersey, criticized Mr. Geithner for not waiting “until you have meat on the bones” before presenting phase two Tuesday of the $700 financial bailout plan, greeted by Wall Street with a massive sell-off because it lacked details of how it would fix the recession.

But, he told CNBC, “this is an enormous challenge. All of us want instantaneous gratification.”

Mr. Menendez predicted a renewal of confidence on Wall Street once details of the bailout are presented and said, “It will turn the market around.”

In addition, investors may be looking to the G7 meeting of industrialized nations in Rome this weekend for signs that the global recession can be brought under control.

There are signs that China’s $585 billion public works stimulus package, announced in November, is beginning to take hold. China may be the world’s first country — the third largest economy after the United States and Japan — to emerge from the worldwide economic meltdown, reported Bloomberg News, citing 14 economists.

On the corporate front, Toyota Motor Corp., the world’s biggest automaker, announced that it was offering buyouts to 18,000 workers, cutting production in North America and reducing the pay of executives by up to 30 percent — all because of slumping global sales.

Buyouts will not be offered at unionized factories in the United States and Mexico or at a plant in Canada, the company said.

Further, the company plans to introduce shorter workweeks in April among hourly workers at assembly plants in Indiana, Kentucky and Texas and parts factories in Alabama, Missouri and West Virginia.

Toyota expects its first annual loss this year for the first time since 1950.

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