Wall Street ended a painful week with another decline Friday as skittish investors unable to hold on to much optimism about the economy drew little comfort from President George W. Bush's stimulus plan.
The day's trading reflected how fractious Wall Street has been in the new year. Investors pulled back from a big early advance, with the major indexes trading mixed as Bush began to speak. By the time the president finished announcing a plan for about $145 billion worth of tax relief, the indexes were well into negative territory.
"It's disappointed in the size of the economic growth package. Wall Street's showing its displeasure," said Kim Caughey, equity research analyst at Fort Pitt Capital Group in Pittsburgh. "Honestly, I think the institutional investors understand the limits to the government's ability to enact economic change."
Coming after Bush's announcement, Friday's pullback made it clear that the stock market is in for a protracted period of uncertainty and continued declines. Investors have shrugged off all the positive signs they've received in recent days, including assurances last week from Federal Reserve Chairman Ben Bernanke that the Fed is ready to act aggressively — which means a likely big interest rate cut later this month — to help support an economy pummeled by devastation in the housing and credit markets.
Steven Goldman, chief market strategist at Weeden & Co., contends Wall Street remains concerned about whether other economic troubles are lurking.
"It's a culmination of factors that have been in existence for a while — it's the unknown," he said.
The market will likely need a long string of upbeat economic and corporate reports before it can regain its footing — and with the economy clearly weak right now, it is likely to be a while before that kind of data becomes available.
The Dow Jones industrial average, which was up more than 180 points early in the session, fell 59.91, or 0.49 percent, to 12,099.30. The Dow plunged 306 points Thursday amid deepening pessimism about the economy.
The broader Standard & Poor's 500 index fell 8.06, or 0.60 percent, to 1,325.19, while the technology-focused Nasdaq composite index dropped 6.88, or 0.29 percent, to 2,340.02.
For the week, the Dow and the Nasdaq lost 4 percent, while the S&P 500 gave up 5.4 percent. In the 13 trading sessions of the 2008, the Dow has lost nearly 9 percent, while the S&P has fallen 9.75 percent and the Nasdaq nearly 12 percent.
The week's sell-off left the Dow and the S&P 500 well below their October highs — which had the Dow at a record trading high of 14,198.09. The Dow has fallen more than 2,000 points, or 14.6 percent, while the S&P 500 is down nearly 240 points, or 15.3 percent.
Disappointment with Bush's plan came as investors were searching for those companies that might be weathering the economic slowdown well.
Some are indeed doing better than expected — like International Business Machines Corp., which told Wall Street late Thursday to raise its 2008 profit estimates for the tech company, and General Electric Co., which posted a fourth-quarter profit rise Friday.
But many others are struggling. Washington Mutual Inc. reported a steep loss late Thursday for the fourth quarter, as Citigroup Inc. and Merrill Lynch did earlier in the week. With the banking industry trying to fix its shrinking portfolios and preparing for more distress in consumer debt, the economy may only have the government to fall back on — and Wall Street didn't hear as much as it wanted from Bush.
In addition, many investors have been hoping that the Federal Reserve would put in place an intra-meeting rate cut before the central bank's next monetary policy meeting Jan. 29-30. "The market is saying to the Fed: we want a rate cut and we want it now. The fact that it is not getting a rate cut is causing a lot of selling that is feeding on itself," said Peter Cardillo, chief market economist at Avalon Partners.
Government bond prices slipped. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.64 percent from 3.63 percent late Thursday.
On Thursday, a dismal reading on the Philadelphia Fed's manufacturing index and ratings agency downgrades of bond insurers sent the market tumbling. On Friday, a Bank of America Corp. analyst cut its ratings on three bond insurers — MBIA Inc., Ambac Financial Group and Security Capital Assurance Ltd. — to "neutral" from "buy."
MBIA fell 67 cents, or 7 percent, to $8.55 after a sharp drop Thursday.
Ambac rebounded from Thursday's drop, though, rising 34 cents, or 5.5 percent, to $6.58. The company said Friday it will ditch its previous plan to raise $1 billion in capital, a decision many investors considered an ill-advised move to maintain its ratings.
Security Capital Assurance fell 17 cents, or 9.3 percent, to $1.65.
A better-than-expected reading on consumer sentiment came as a pleasant surprise to investors Friday, but ultimately did not help Wall Street save its early advance. The University of Michigan's index, which most economists expected show a decline for mid-January, rose instead. Though not a perfect predictor of consumer spending, the report gave Wall Street some hope that Americans' buying might not drop off too precipitously amid worries about a recession.
The Index of Leading Economic Indicators, a gauge of future economic activity skidded 0.2 percent in December, registering its third consecutive monthly decline.
The dollar rose against most major currencies, while gold slipped.
The Russell 2000 index of smaller companies fell 7.41, or 1.09 percent, to 673.16.
Meanwhile, chip maker Advanced Micro Devices Inc. late Thursday said its fourth-quarter net loss widened, but the loss was smaller than Wall Street predicted. AMD surged 73 cents, or 11.5 percent, to $7.07.
IBM rose $2.30, or 2.3 percent, to $103.40 on its strong forecast.
Washington Mutual rose $1.09, or 8.8 percent, to $13.55. Many investors, in anticipation of an even bigger fourth-quarter loss, had driven the savings and loan's stock sharply lower Thursday.