- The Washington Times - Tuesday, November 11, 2008

NEW YORK (AP) — Volatility buffeted Wall Street again Tuesday as the reality hit investors that few industries are safe from the consumer spending slump — whether they’re building homes, making cars or selling coffee.

But some appetite remained for bargain-priced stocks. The market did manage to recover from its lows of the day after a media report that a BlackRock executive said a $30 billion Bear Stearns mortgage portfolio could be worth more than its market value suggests.

“It’s a piece of data that’s alleviating some fears,” said Ryan Larson, senior equity trader at Voyageur Asset Management, a subsidiary of RBC Dain Rauscher.

Moreover, the government and the mortgage industry announced the most sweeping effort yet to help troubled homeowners by speeding up the process for renegotiating hundreds of thousands of delinquent loans held by Fannie Mae and Freddie Mac.

Still, the market had much to contend with. Although the mortgage crisis that spawned the current downturn is being addressed, the economy remains extremely troubled. It’s becoming clear that it’s going to be hard to rely on the average consumer to pull the economy out of its downturn. Late Monday, Starbucks Corp. reported lower sales across the coffee chain, and early Tuesday, Toll Brothers Inc. posted a sharp drop in revenue and said it was too difficult to predict what the luxury homebuilder’s profit would be next year.

Investors are also jittery as the nation’s feeble automakers try to get a bailout from the federal government, much like the troubled insurer American International Group Inc. has. General Motors Corp., whose shares have plunged to 60-year lows, said late Monday it would cut 1,900 factory jobs on top of the 3,600 cuts it announced Friday.

In midafternoon trading, the Dow Jones industrial average shed 75.51, or 0.85 percent, to 8,795.03 after falling by more than 300. The blue chip index has not dipped below the 8,000 mark in trading since Oct. 10, but is down about 35 percent since the start of the year.

Broader stock indicators retreated as well, but rebounded off their lows. The Standard & Poor’s 500 index fell 9.94, or 1.07 percent, to 909.37; and Nasdaq composite index dropped 15.12, or 0.94 percent, to 1,601.62.

The Russell 2000 index of smaller companies rose 2.93, or 0.59 percent, to 496.03.

There were no economic reports released Tuesday, since the government and bond markets were closed for Veterans Day. But investors didn’t need government data to see that the economy’s downward slide isn’t over — the litany of troubling corporate news was enough. Wall Street has been anticipating grim results from corporate America, but it cannot gauge yet how bad they could get.

“We’re in a situation where we really don’t know how deep a recession we’re in,” said Jim Herrick, manager of equity trading at Baird & Co. “Until there’s some clarity on the economy and clarity with earnings, we’ll definitely be stuck in this trading range.”

Herrick referred to the fact that the market has quickly given back its gains — including a 248-point advance last Friday — as it tries to recover from October’s heavy selling.

And the financial sector is not in a strong position to help out. The credit markets have eased a bit since Lehman Brothers Holdings Inc.’s bankruptcy in mid-September, but they remain tight.

Investors are impatient to see positive developments — in the real economy, not just in market borrowing rates — from the massive government interventions over the past two months, said Alan Gayle, senior investment strategist and director of asset allocation for RidgeWorth Capital Management. “The market is wondering, how far does the line go out the door for government assistance?”

The insurer American International Group Inc. got more bailout money Monday, and later that day, American Express Co. got approval from the government to become a commercial bank. The credit card lender will now be able to accept deposits and access the government financing other banks have been using.


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