* Wall St set to end 2008 as one of worst years ever
* Fed sets target for buying mortgage-backed securities
* Initial jobless claims fall more than expected
* S&P 500 futures up 0.4 pct, Dow futures up 0.2 pct,
Nasdaq futures off 0.3 pct
* For up to the minute market news, please click on
[].
(Updates with jobless claims)
By Leah Schnurr
NEW YORK, Dec 31 (Reuters) - U.S. stocks were set for a
mixed open on Wednesday, which ends one of Wall Street's worst
years and raises hopes that a new year and fresh policy
initiatives will stave off a deepening recession.
The Federal Reserve on Tuesday pushed forward with its
effort to drive down mortgage costs, setting a target of buying
$500 billion in mortgage-backed securities by mid-2009.
The move could bolster optimism as investors have been
heartened by signs that the Fed is fighting aggressively to
cushion the downturn, including dropping interest rates to near
zero.
"Things haven't improved but at least the Fed has stopped
things from appreciably worsening," said Barry Ritholtz, chief
market strategist at Fusion IQ in New York.
"Clearly most investors this year were not prepared for
what happened and I think there's a sigh of relief from those
that were blindsided that the year is finally over."
The number of workers filing new claims for jobless
benefits fell much more than expected to 492,000, but seasonal
factors likely contributed to the drop and the labor market
remains very soft. For more details, see [].
S&P 500 futures <SPc1> rose 3.40 points and were above fair
value, a formula that evaluates pricing by taking into account
interest rates, dividends and time to expiration on the
contract. Dow Jones industrial average futures <DJc1> climbed
14 points, while Nasdaq 100 <NDc1> futures were off 3.25
points.
The broad S&P 500 looks set to end 2008 down about 40
percent for the year, though it has recovered almost 18 percent
since hitting an 11-year low on Nov. 20.
Markets around the world have been pummeled as the collapse
of the U.S. housing market evolved into a global credit crunch
and economic slowdown which infected everything from financials
to automakers to retailers.
The U.S. casualties include the bankruptcy, acquisition or
government takeover of such household names as Bear Stearns,
American International Group <AIG.N>, Washington Mutual,
Merrill Lynch and Lehman Brothers.
AIG, which was rescued by the government soon after the
collapse of Lehman, is prepared to ask the Federal Reserve to
relax rules on its more than $60 billion disposals program to
allow bidders to use a greater proportion of shares to pay for
its assets, the Financial Times reported.
On the housing front, demand for U.S. mortgage applications
was unchanged during the Christmas holiday week, holding the
highest levels in more than five years with loan rates near
record lows, an industry group said on Wednesday.
Bernard Madoff, alleged to have run a decades-long $50
billion Ponzi scheme, faces a Wednesday deadline to tell
regulators how much he is worth and where his money and other
assets are. For details, see [].
The Madoff scandal, which came to light earlier this month,
has added to already negative sentiment in the markets. Scores
of wealthy people, banks, universities and charities around the
world say they are victims, but so far the exact amount of
money lost is not known in what could be the largest fraud in
Wall Street history.
On Tuesday, stocks climbed after the government expanded
its bailout of the auto industry, encouraging hopes
policy-makers will continue to take steps to minimize the
severity of the year-long recession.
(Editing by Tom Hals)
