Markets Fluctuate as Investors Digest Weak Housing Data

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	DJIA 8,852.22  -127.04    NASDAQ 1,711.29  -6.42    SPX 940.55  -5.88    S  3.06 -0.27    LMT  90.75 -1.82    FNM  0.95 -0.04    DJIA 8,852.22  -127.04    NASDAQ 1,711.29  -6.42    SPX 940.55  -5.88    S  3.06 -0.27    LMT  90.75 -1.82    FNM  0.95 -0.04

Personalize Ticker | Updated 4:00 PM, 10/17/2008	Disclaimer | © MarketWatch Inc. Source: Interactive Data Corp

Wall Street fought against more negative economic news, including fewer new homes being built and further evidence of slumping consumer confidence, in a volatile trading session that saw the indexes see-saw between gains and losses.

After falling more than 200 points at the opening, the Dow Jones industrial average was up about 2.5 percent, or 223 points, at 1:30 p.m. The Standard & Poor's 500-stock index was up 3 percent and tech-heavy Nasdaq was up 2.8 percent. But by 3:30 p.m., all the indexes were flat.

It appears Wall Street is going to end the week with another volatile session. Yesterday the Dow surged in the last hour of trading, closing up 400 points, after falling more than 700 points on Wednesday and Tuesday and scoring a historic gain of more than 900 points on Monday.

Speaking before the markets opened, President Bush defended his response to the financial crisis and urged Americans to be patient and allow time for the government's market interventions to work. In its latest response to the crisis, the Treasury Department said this week it will make direct capital injections in major banks, and last week the Federal Reserve participated in a coordinated global interest rate cut.

"The federal government has responded to this crisis with systematic and aggressive measures to protect the financial security of the American people," Bush said in a speech at the U.S. Chamber of Commerce in Washington. "It took a while for the credit system to freeze up; it will take a while for the credit system to thaw."

A Commerce Department report today found that the housing downturn continues to intensify. New home construction fell sharply again in September and requests for new building permits fell to levels not seen since the recession of the early 1980s.

New home construction fell to a seasonally adjusted annual rate of 817,000, a 6.3 percent decline from the month before and more than 31 percent below September of a year before. It is the lowest monthly rate for home starts since January 1991.

Permit requests fell to a seasonally adjusted annual rate of 786,000, an 8.3 percent decline from August and more than 38 percent below the same month a year ago. Building permits are considered a barometer of future activity.

The drop in home construction is "a fairly precise illustration of the negative sentiment that has evolved among builders," said Joseph Brusuelas, chief U.S. economist at California-based Merk Investments. "Given the ongoing problems in the credit markets, the development community should brace itself for a number of months of record low activity and consolidation."

The housing data adds to the latest retail sales, durable goods, employment and industrial production reports, which all indicate that the economy took a sharp turn for the worse in September, said Patrick Newport, U.S. economist for Global Insight. Making matters worse, mortgage rates have jumped to 6.46 percent for a 30-year fixed-rate mortgage.

"These reports do not incorporate the effects of October's financial meltdown," Newport said.

Reflecting the turbulence, consumer confidence suffered its steepest monthly drop on record in October, according to a survey released today by Reuters/University of Michigan Surveys of Consumers. The confidence index fell to 57.5 in October from 70.3 in September, worse than economists' expectations.