Stimulus doubts drag down Wall Street


POSTED: Wednesday, February 18, 2009

NEW YORK » Doubts that the government's stimulus and bank bailout programs can stop the global economic freefall dragged Wall Street to within a fraction of a point of its lowest close in 5 years yesterday.

As President Barack Obama signed the $787 billion stimulus bill and automakers scrambled to come up with restructuring plans, investors waited anxiously for more specifics about efforts to rescue the economy.

The Dow Jones industrial average closed down 297.81 points, or 3.79 percent, at 7,552.60 - just 31-hundredths of a point above its post-meltdown Nov. 20 close of 7,552.29, which was its lowest close since March 12, 2003. The Standard & Poor's 500 index fell 37.67, or 4.56 percent, to 789.17.

Worries about ailing banks, struggling automakers, tumbling home prices and cash-strapped consumers are threatening to push U.S. stocks back to levels not seen since the late 1990s.

Obama is scheduled to discuss a program today on preventing foreclosures, but investors are especially anxious for details from the U.S. Treasury Department about its new rescue plan for the troubled banking sector.

Yesterday, the Nasdaq composite index fell 63.70, or 4.15 percent, to close at 1,470.66. The Russell 2000 index of smaller company stocks fell 19.46, or 4.34 percent, to 428.90.

Only 219 stocks rose on the New York Stock Exchange, while 2,898 fell. Volume came to 1.61 billion shares. Investors fled from stocks and flocked instead to Treasurys, sending government debt yields lower.

The retreat in U.S. stocks occurred alongside a pullback in markets overseas. In Asia, Japan's Nikkei stock average fell 1.4 percent, and Hong Kong's Hang Seng index fell 3.79 percent.

In Europe, Britain's FTSE 100 fell 2.43 percent; Germany's DAX index fell 3.44 percent; and France's CAC-40 fell 2.94 percent. In Latin America, Brazil's Ibovespa index plunged 4.8 percent, and Mexico's IPC index fell 3.4 percent.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.65 percent from 2.90 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose marginally to 0.29 percent from 0.28 percent late Friday.

U.S. markets were closed on Monday.

The dollar rose against other major currencies. Gold prices also rose.

Oil prices fell $2.58 to $34.93 per barrel on the New York Mercantile Exchange.