Stocks Fall Despite Action on Housing

Fresh moves by the government to limit home foreclosures lifted the market in mid-afternoon trading yesterday, but the federal action was not enough to stave off a second day of losses.

U.S. stocks fell as corporate balance sheets continued to reflect the massive falloff of consumer spending and home values. The Dow Jones industrial average closed down 1.99 percent, or 176.58 points, to 8693.96. The Standard & Poor's 500-stock index lost 2.20 percent, or 20.26 points, to 898.95. And the tech-heavy Nasdaq composite index took a hit of 2.22 percent, or 35.84 points, to close at 1580.90.

The losses followed the announcement that Fannie Mae, Freddie Mac and other lenders would modify mortgages for borrowers at risk of foreclosure to help people stay in their homes. But the announcement's impact on the market was eclipsed by grim financial news of bad earnings across various sectors.

Trading was light because of the Veterans Day holiday, and no new economic data were released. But investors continued to be influenced by Monday's news that Starbucks had a 97 percent drop in quarterly profit and that Circuit City had filed for bankruptcy protection.

"In the absence of economic news, these data points continue to show weakness in consumer spending, which is not surprising," said Christopher Versace, portfolio manager for Agile Capital Management, a Reston-based hedge fund.

The Dow was dragged down for a second day by General Motors. The Detroit automaker's stock closed down 13.1 percent as Washington officials debate another bailout of the auto sector.

Early yesterday, Toll Brothers stock dropped sharply but closed down less than 1 percent after the luxury home builder reported a 41 percent decline in revenue and declined to give forecasts for the next year because of uncertain market conditions. American Express sank 6.6 percent.

"Some people are optimistic that the cumulative efforts by the government will show more of an impact than has been the case so far," said Sean Ryan with Sterne Agee. "But there are a lot of others that remain skeptical of the government's ability to cushion the blow."

Overseas, Japan's Nikkei index fell 3 percent and Hong Kong's Hang Seng fell 4.77 percent. Stocks in Britain, Germany and France all fell more than 3.5 percent.

Oil fell 5 percent, to settle at $59.30 a barrel, near 20-month lows.

Staff writer Renae Merle contributed to this report.