Stocks in a struggle

Wall Street churns a day after hitting 3-month lows, as investors digest Obama's plan to help struggling homeowners.

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By staff

What should the government do about GM and Chrysler?
  • Loan them more money
  • Force them to restructure
  • Force them into bankruptcy

NEW YORK ( -- Stocks struggled Wednesday morning as investors eyed a worse-than-expected housing market report and began digesting details of President Obama's housing rescue plan.

The Dow Jones industrial average (INDU) lost 18 points or 0.2% after ending the previous session just above the bear market closing low of Nov. 20, 2008.

The Standard & Poor's 500 (SPX) index lost 4 points or 0.5%. The Nasdaq composite (COMP) lost 7 points or 0.5%. The Nasdaq has performed better than the rest of the market and has held above its bear-market lows.

Stocks had inched higher in the first 20 minutes of the session, but soon lost steam.

On Tuesday, stocks were walloped as investors continued to worry about how long and deep the recession will be. The Dow industrials lost 3.8%, to finish at the lowest point since the bottom of the bear market in November. Both the S&P and Nasdaq sank more than 4%.

"Obviously, the market weighed in with its underwhelming support for the [government's] three-pronged approach," said Art Hogan, chief market strategist at Jefferies & Co., referring to the government's bank rescue, economic stimulus and foreclosure mitigation plans.

"Today, as cooler heads prevail, we might see a bit of a rebound," said Hogan. "We'll probably get a bit of a rally in an oversold market."

Before the start of trading, GE (GE, Fortune 500) said Chief Executive Jeffrey Immelt waived his $12 million bonus for 2008, noting that the company's earnings declined 19% during last year's "tough environment."

Automakers: General Motors (GM, Fortune 500) and Chrysler submitted their financial survival plans to the government, combining to ask the government for $21.6 billion in additional aid in order to stave off bankruptcy.

The two firms, in documents submitted to the Treasury Department, also detailed plans to cut 50,000 jobs worldwide by the end of the year. GM said it plans to close five more plants in the next few years and confirmed it will drop some of its weaker brands.

Housing: The Obama administration unveiled a $75 billion multi-pronged plan Wednesday that seeks to help up to 9 million borrowers suffering from falling home prices and unaffordable monthly payments.

The president signed his $787 billion stimulus package into law on Tuesday.

Economy: Before the opening bell Wednesday, the Census Bureau announced further declines in the housing industry.

Housing starts fell to an annual rate of 466,000 units in January, down from 550,000 the prior month. They were expected to fall to an annual rate of 530,000 in January, according to a consensus of economists from

Building permits fell to an annual rate of 521,000 in January, down from 547,000 the prior month. They were forecast to fall to an annual rate of 525,000 in January, according to the consensus.

Industrial production, meanwhile, is expected to drop by 1.5% in January, compared to a 2% decline in the prior month. That report will be revealed at 9:15 a.m. ET.

At 2 p.m. ET, Fed Chairman Ben Bernanke is slated to speak about the Federal Reserve's lending programs and balance sheet at a meeting of the National Press Club.

Also, the minutes will be released for the Jan. 27-28 meeting of the Federal Open Market Committee. The Fed left its key interest rate near 0% at that meeting and said it stood ready to take additional steps to try to fix the troubled U.S. economy and credit markets.

Companies: Comcast (CMCSA, Fortune 500), a provider of cable and Internet services, and Goodyear Tire (GT, Fortune 500) announced quarterly results.

Comcast reported earnings of 20 cents per share, a decline from 27 cents during the year-ago quarter.

"Despite a very difficult economic environment, we met or exceeded all of our financial targets, demonstrating the strength of our subscription businesses," said Comcast Chief Executive Brian Roberts, in a press release.

Goodyear did worse than expected, reporting a net loss of $1.37 for the fourth quarter. Analysts had expected a loss of $1.02 per share, according to a consensus of forecasts compiled by Thomson Reuters. The company also said it would cut 5,000 jobs, on top of 4,000 last year.

"Given lower industry demand, we are taking aggressive action, reducing tire production, cutting costs and adjusting investments to better match market conditions," said Chief Executive Robert Keegan, in a press release.

In the afternoon, all eyes will be on the computer maker Hewlett-Packard (HPQ, Fortune 500) and the broadcaster CBS (CBS, Fortune 500), which are on tap to report their quarterly results.

Other markets: Asian stocks ended mixed Wednesday, with Japan's Nikkei index down nearly 1.5%. European markets were lower in afternoon trading.

Light crude oil for March delivery rose 53 cents to $35.46 a barrel on the New York Mercantile Exchange. To top of page

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