Wall Street pulls back after big 2-day rally

Wall Street pulls back after big 2-day rally

Wall Street sold off Tuesday as investors, while heartened by government plans to aid consumer lending companies, cashed in some of their winnings after a huge two-day rally.

Some selling was widely expected after the market's major indexes soared more than 11 percent over the course of Friday and Monday. Those back-to-back gains were the market's first in three weeks, and Wall Street, consumed by worries about the economy, has been unable to hold on to its advances for very long.

Still, investors were somewhat encouraged after the Treasury Department and the Federal Reserve plan to provide $800 billion to help unfreeze the market for consumer debt and to make mortgage loans cheaper and more available. The program is aimed at reviving moribund credit markets.

The government, while looking to reduce fear in the credit markets, is eager to see lenders including credit card companies, student loan issuers and car purchase financers resume more normal levels of lending to help stimulate the economy. Since September, when credit markets first froze, financial institutions have been hesitant to hand over money for fear they won't be repaid. That, in turn, has made it harder for businesses and consumers to borrow.

"We're getting more clarity about the federal assistance across the board, and I think that's being well received," said Arthur Hogan, chief market analyst at Jefferies & Co. "Most of the overhangs in the market are getting answers."

The government's latest effort to combat the fear hobbling the marketplace overshadowed a report that the nation's overall economic output shrank in the July-September quarter faster than initially estimated as consumers slashed spending by the most in 28 years.

The Commerce Department said third-quarter gross domestic product declined at a 0.5 percent annual rate, outpacing the 0.3 percent first estimated a month ago. Still, Wall Street had expected the number would worsen, so the report didn't catch the market by surprise. It was the worst reading since growth fell at a 1.4 percent pace in the third quarter of 2001, which was during the last recession.

And, ahead of the holiday shopping season, investors got some good news about consumers. The Conference Board said its Consumer Confidence Index unexpectedly rose to 44.9 in November, up from a revised 38.8 in the previous month. Last month's reading was the lowest since the research group started tracking the index in 1967. Economists expected the index to slip to 37.9.

The business research group said Americans' views on the economy still remain the gloomiest in decades. Consumer spending, always a concern on the Street, has taken on greater importance because the economy cannot expand unless consumers are spending - and they've shown increasing reluctance the past few months, a troubling sign with the holiday season approaching.

By early afternoon, the Dow Jones industrial average fell 111.27, or 1.32 percent, to 8,332.12. The index was up 164 points earlier in the session.

Broader indexes were lower. The Standard & Poor's 500 index fell 10.29, or 1.21 percent, to 841.52. The Nasdaq composite index, hurt this year amid signs that companies are cutting back on technology spending, fell 33.03, or 2.24 percent, to 1,438.99.