* GE, financials fall on outlook downgrades
* Bernanke, Paulson urge action on bailout
* Prospect of rescue plan delay sours market sentiment
* Dow off 1.5 pct; S&P down 1.6 pct, Nasdaq down 1.2 pct
(Updates to close)
By Steven C. Johnson
NEW YORK, Sept 23 (Reuters) - U.S. stocks fell on Tuesday
on fear that congressional wrangling could delay a proposed
$700 billion plan to rescue the financial sector, increasing
worries about the struggling U.S. economy.
General Electric <GE.N> was the biggest drag on the S&P
500, falling more than 4 percent, after Goldman Sachs cut the
company's profit outlook. GE also weighed on the Dow.
Downgrades also hurt the shares of Bank of America
<BAC.N>, off 2.5 percent, while energy company shares weakened
with the price of oil.
The main focus, though, was on the government's rescue
plan, which involves mopping up bad mortgage debt from bank
balance sheets in an effort to get them lending again.
Federal Reserve Chairman Ben Bernanke on Tuesday urged
Congress to approve the plan quickly, warning a delay would
put the economy at risk, but lawmakers pushed back, saying it
still lacked detail.
"Everybody's waiting for this plan to be detailed, and the
longer it's delayed, the more people speculate that maybe it
won't happen. The one thing the market hates is uncertainty,"
said Edward Craig, head of cash equities trading at Jefferies
Group in New York.
The Dow Jones industrial average <> was down 161.52
points, or 1.47 percent, at 10,854.17. The Standard & Poor's
500 Index <.SPX> was down 18.87 points, or 1.56 percent, at
1,188.22. The Nasdaq Composite Index <> was down 25.64
points, or 1.18 percent, at 2,153.34.
Bernanke told the Senate Banking Committee that "action by
Congress is urgently required to stabilize the situation and
avert what could otherwise be very serious consequences for
our financial markets and our economy."
Earlier, technology shares led the market higher on hopes
that the government's rescue plan would loosen up lending and
boost spending.
But doubts about the bailout plan took center stage by
late afternoon, and some traders said that even a swift
passage of the bill would not lead to the end of the credit
crisis or necessarily bolster the slumping U.S. housing
market.
"The big question is 'Will the banks lend if they get
their balance sheets cleaned up?'" said Joe Saluzzi,
co-manager of trading at Themis Trading in Chatham, New
Jersey. "We need that money to start flowing again, but if the
unemployment rate is going up, banks might be a little
hesitant. So in the short run, the path of least resistance
for stocks is down."
A drop in global commodity prices hurt shares of natural
resources companies, including aluminum producer Alcoa <AA.N>,
down 4.5 percent at $25.59, and Exxon Mobil <XOM.N>, off 1.5
percent at $77.69.
Bank of America shares shed 2.5 percent, or 85 cents, to
$33.30. The stock fell after Oppenheimer & Co. bank analyst
Meredith Whitney cut her profit outlook on the No. 2 U.S. bank
and forecast more dividend cuts for banks in general, saying
the government's bailout plan had little hope of improving
core fundamentals over the near and medium term. For details,
see []
General Electric fell 4.6 percent to $24.95 after an
analyst at Goldman Sachs cut the profit outlook on the
diversified manufacturer.
After leading an earlier rally, technology shares turned
negative, with iPod maker Apple Inc <AAPL.O> shedding 3.2
percent to $126.84. Economic bellwether Microsoft <MSFT.O>
ended up just 0.2 percent, or 4 cents, at $25.44.
Technology shares are considered among the better placed
to gain if the government's bailout plan is passed, analysts
said.
"If they can free up lending as a result of this package,
I think that will spur business. If you want to capitalize on
a recovery in the fourth quarter, you're going to go into
growth stocks and that's in tech," said Marc Pado, U.S. market
strategist at Cantor Fitzgerald & Co in San Francisco.
About 1.15 billion shares changed hands on the New York
Stock Exchange, below last year's estimated daily average of
roughly 1.90 billion, while on Nasdaq, about 2.00 billion
shares traded, also below last year's daily average of 2.17
billion.
Declining stocks outnumbered advancing ones on the NYSE by
about 2.6 to 1. On the Nasdaq, decliners beat advancers by a
ratio of about 2 to 1.
(Additional reporting by Ellis Mnyandu; Editing by Jan
Paschal)
