Stocks faltered again in New York Wednesday, as investors wrestled with viability plans from two of Detroit's automakers, digested the Commerce Department's latest report on the housing market and mulled the Obama administration's housing market plan.

After Tuesday's close, Chrysler and General Motors (nyse: GM - news - people ) filed restructuring updates with the Treasury Department. The reports were a condition of a $13.4 billion loan package that the carmakers received from the government late in 2008. Both companies said they are making progress, but will need additional loans to outlast the downturn in consumer spending that has crippled domestic auto sales. GM, which said it could need more than $30.0 billion by 2011 in order to remain on pace for sustainable profitability by 2012, gained 6 cents, or 2.8%, to $2.24 Wednesday. (See "Loans Can't Bridge Detroit Disconnect.")

The major averages opened higher on a reflex to a steep drop Tuesday, but less than an hour into the session stocks had slipped back into the red. The Dow Jones industrial average was down 60 points, or 0.8%, to 7,493; and the Nasdaq fell 11 points, or 0.8%, to 1,459; while the Standard & Poor's 500 lost 7 points, or 0.9%, to 782, threatening to test its Nov. 2008 lows.

The Treasury offered an outline of the housing plan Wednesday morning, which includes additional preferred stock purchase agreements with Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people ), help with refinancing and $75.0 billion for loan modifications that would include government subsidies for certain homeowners at risk of foreclosure. President Obama is due to explain the plan in Arizona later in the day. Earlier Wednesday, the Commerce Dept. said housing starts and completions were down sharply in January, as were permits for new building. (See "Fannie And Freddie Redux.")

Bond insurer MBIA (nyse: MBI - news - people ) announced it will split itself in two, establishing a separate public finance guarantee insurance company that will concentrate on municipal bonds. The move would shield the firm's muni bond business from its activities in structured finance and international bonds. Shares of MBIA gained $1.33, or 38.2%, to $4.81, early in the session.

Deere & Company (nyse: DE - news - people ) lost $1.66, or 5.0%, to $31.83, after the farm equipment maker's first-quarter earnings fell short of analyst expectations. On an encouraging note, Deere said it has not had trouble accessing credit to fund its own needs and financing for customers.

Federal Reserve Chairman Ben Bernanke will make a speech on the central bank's balance sheet in Washington Wednesday afternoon, and the Fed's minutes from its January monetary policy meeting will be released shortly afterward.

Thomson Reuters contributed to this article.

Stocks hold gains despite sluggish housing data

Investors were relieved Tuesday after a government report on the economy met expectations and eased their concerns that the recession is deepening.

The Commerce Department reported third-quarter gross domestic product, a measure of the economy that tallies the value of goods and services, fell at an annual rate of 0.5 percent. That was in line with analysts' expectations and matched the government's estimate of a month ago.

While the readings show further weakness, investors have likely already priced in very low expectations. The concern, however, is that the current quarter will be much worse.

The market was also able to get past a report that showed sales of new homes fell in November to the slowest pace in nearly 18 years, while new home prices dropped by the biggest amount in eight months.

New home sales fell by 2.9 percent to a seasonally adjusted annual sales pace of 407,000 units, a weaker performance than economists had expected and was the slowest sales pace since January 1991. The median price of a new home sold in November was $220,400, a drop of 11.5 percent from the sales price a year ago.

Trading volume was light, and is expected to remain so the rest of this week as investors head into the holidays. Analysts are mindful that light volume tends to skew the market's movements, and warned that this week may not suggest any long-term trends.

"Don't read too much into the numbers until the end of the day, we're really in a holding pattern right now," said Ryan Larson, head of equity trading at Voyageur Asset Management. "It is a very quiet news week, and much of it has already been priced into the market."

In late morning trading, the Dow Jones industrial average rose 20.87, or 0.24 percent, to 8,540.64.

Broader indexes were also higher. The Standard & Poor's 500 index rose 2.95, or 0.34 percent, to 874.58. The Nasdaq composite index added 6.58, or 0.43 percent, to 1,538.93. The Russell 2000 index of smaller companies fell 0.96, or 0.20 percent, to 474.11.

Advancing issues led decliners by 4 to 3 on the New York Stock Exchange, where volume came to 245 million shares.

Bond prices were little changed Tuesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.15 percent from 2.17 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, was unchanged at 0.02 percent from late Monday.

In corporate news, greeting-card company American Greetings Corp. said it swung to a third-quarter loss, hurt by hefty charges and a decline in sales. Shares fell $3.00, or 30 percent, to $6.82.

Commercial financial firm CIT Group Inc. said Tuesday it received preliminary approval to obtain $2.33 billion as part of the government's $700 billion bank investment program.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude fell 76 cents to $39.10 a barrel on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average rose 1.57 percent. Hong Kong's Hang Seng index fell 2.75 percent. In afternoon trading, Britain's FTSE 100 was up 1.05 percent, Germany's DAX index was up 1.11 percent, and France's CAC-40 was up 0.48 percent.

Copyright 2008 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

Matthew Hollister

What's the best way to stabilize plunging home prices? Treasury Secretary Hank Paulson and his staff are considering plans to push mortgage rates down to 4.5% in hopes of bringing buyers back into the moribund market. But many Democrats—in Congress and on President-elect Barack Obama's team—seem more set on pressing lenders to renegotiate troubled mortgages. That tack, championed by Federal Deposit Insurance Corp. head Sheila Bair, is aimed at trimming foreclosures and ending fire sales.

The differing approaches have led to a standoff. The government transition also makes it less likely that much will happen before Obama takes over in late January. That's worrisome: Without reducing foreclosures and ending the slide in home prices, it will be nearly impossible to stabilize banks and lessen the depth of the recession. And sharply rising unemployment has added new urgency: Last spring, Rod Dubitsky, Credit Suisse's (CS) head of research for asset-backed securities, projected 6.5 million foreclosures. With unemployment set to top 8% in 2009, he says up to 10 million families may lose their homes.

Still, policymakers remain split on the best approach. Bair repeatedly has been ahead of Paulson in calling for a stronger policy response, but when she first suggested pushing lenders harder to modify iffy mortgages last spring, it was dismissed. Since then she has instituted many of her ideas at IndyMac, the failed thrift the FDIC took over in July.

Bair's plan offers a guarantee to lenders that modify a mortgage so payments are trimmed to 31% of a homeowner's gross income. If they cut interest rates or stretch out the life of a loan, Washington would cover part of the lender's losses should a homeowner redefault. Bair says the plan would save 1.5 million homeowners at a cost of $24.4 billion. But skeptics say conflicting investor interests make it legally tough to modify securitized loans. And new statistics suggest that more than half of loans modified early this year are already at least 30 days past due—though Bair notes many early modifications did little to lower homeowners' monthly costs.

Paulson argues that Bair's plan is inappropriate for the Treasury's $700 billion rescue, because it would be an expenditure rather than an investment that would earn a return. The proposal also would reward banks for failed modifications instead of successful ones, since lenders would get subsidies only on loans that redefault.

Obama has said little about his plans, but many in Washington believe Bair's proposals will underpin his foreclosure strategy. And many in both parties (Republicans are especially annoyed) see her efforts to publicize the plan as a bid for a bigger job with Obama.

TREASURY'S OPTIONS

Will the incoming Treasury team clash with Bair, too? According to a recent Bloomberg story, Timothy F. Geithner, the head of the New York Fed and Obama's nominated Treasury Secretary, is also unhappy with Bair and wants her out before her term ends in 2011. An FDIC spokesman dismisses the idea of an ulterior motive as ridiculous, noting that Bair has championed foreclosure mitigation for years. The New York Fed and the Obama transition team declined to comment.

Treasury says it's studying several options, including the plan to subsidize low rates. Proponents say that by bringing new buyers to the market, the move could help end the pricing slide. "That will be far more important than any amount of loan modifications," says Ken Griffin, CEO of hedge fund giant Citadel Investment Group. Problem is, low rates would do little for those now facing foreclosure or trapped in homes worth less than their mortgages. And with just six weeks left, the Bush Administration is unlikely to launch a new program unless Obama's team signals that it backs the idea, says Howard Glaser, a mortgage industry consultant.

On Dec. 4, Fed Chairman Ben Bernanke proposed a variation on Bair's plan that also draws on the Treasury idea. Instead of guaranteeing losses, he said, Uncle Sam could subsidize reduced interest rates on modified loans. While more complex than the FDIC plan, it would "increase the incentive of [mortgage] servicers to be aggressive in reducing monthly payments," he said. With Geithner and Bernanke having worked closely throughout the crisis, the idea could gain traction as Obama's plans become clearer.