* Paulson backs away from buying mortgage assets
* Best Buy slashes outlook, adds to economic woes
* GM, Ford shares rise on bailout hopes
* Intel falls after the bell after warns on fourth-quarter
* Dow off 4.7 pct, S&P 500 off 5.2 pct, Nasdaq off 5.2 pct
* For up-to-the-minute market news, please click on
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(Updates to with Intel
By Leah Schnurr
NEW YORK, Nov 12 (Reuters) - U.S. stocks sank on Wednesday
for the third day after the United States backed away from
using its $700 billion bailout to mop up sour mortgages and
added to uncertainty about how the government plans to revive
bank lending.
A dismal forecast from Best Buy added to anxiety about a
worsening economy after the largest U.S. electronics chain said
consumers were slashing spending, creating the worst climate in
the company's 42-year history.
A sell-off in large-capitalization technology companies
took the Nasdaq down to its lowest closing level in more than
five years, beating the closing low hit at the end of October.
The S&P 500 came close to retesting October's closing low.
After the closing bell, Intel Corp <INTC.O> added to the
negative outlook for technology, sending stock index futures
lower. The tech bellwether warned its revenue would be about 14
percent below its previous forecast due to weak demand around
the globe. For details, see [].
U.S. Treasury Secretary Henry Paulson said the Treasury's
focus now would be on shoring up financial institutions with
direct investments and his comments served to underscore the
extent of the problems in the U.S. economy. see
[].
When Congress approved the $700 billion bailout plan last
month, the stated purpose was to purchase toxic assets,
especially mortgage-backed securities, from banks.
"Investors are confused. We started going down the route
that we were going to buy the bad assets. Now we're going to
make everything a bank holding company," said Craig Hester, CEO
of Hester Capital Management in Austin, Texas.
Investors sold off financial stocks amid questions about
what the impact of the new plan will be on the sector. Among
the casualties was Citigroup <C.N>, which fell below $10 for
the first time in its history. Citigroup dropped 10.7 percent
to end at $9.64 on the New York Stock Exchange.
The Dow Jones industrial average <> slid 411.30 points,
or 4.73 percent, to 8,282.66. The Standard & Poor's 500 Index
<.SPX> plummeted 46.65 points, or 5.19 percent, to 852.30. The
Nasdaq Composite Index <> lost 81.69 points, or 5.17
percent, to 1,499.21, its lowest close since May 2003.
Apple Inc <AAPL.O>, maker of the iPod and the iPhone, was
the biggest drag on the Nasdaq, falling 4.9 percent to $90.12,
while Intel gave up 7.2 percent at $12.55 after the bell.
Best Buy lost 8 percent to $21.97. The reduced forecast
came on the heels of Circuit City Stores Inc <CCTYQ.PK> filing
for bankruptcy protection, providing further evidence of anemic
consumer spending.
In an ironic twist, the deeply troubled auto sector
provided one of the few bright spots in the day.
General Motors <GM.N> was the only advancer among the 30
Dow components amid hopes the automaker will get the financial
assistance it desperately needs. GM, Ford <F.N> and Chrysler
LLC are seeking $25 billion in urgent federal assistance as
their cash burn rates rise.
GM's stock climbed 5.5 percent to $3.08, while Ford gained
2.2 percent to $1.84.
The energy sector dove as the price of oil continued
declines as the U.S. government cut its global demand growth
forecast. U.S. front-month crude oil <CLc1> fell $3.17 to
settle at $56.16 a barrel, the lowest close since the end of
January 2007.
Chevron <CVX.N> and Exxon Mobil <XOM.N> were the two top
drags on the Dow. Chevron lost 8.5 percent to $67.28 and Exxon
dropped 5.1 percent to $68.93, while an index of S&P 500 energy
companies <.GSPE> slid 7.3 percent.
On the earnings front, department store operator Macy's Inc
<M.N> posted a narrower-than-expected quarterly loss as
consumers curbed their shopping. Macy's fell 11.1 percent to
$8.37.
Trading was moderate on the New York Stock Exchange, with
about 1.46 billion shares changing hands, below last year's
estimated daily average of roughly 1.90 billion, while on
Nasdaq, about 2.20 billion shares traded, above last year's
daily average of 2.17 billion.
Declining stocks far outnumbered advancing ones on the NYSE
by a ratio of about 12 to 1, while on the Nasdaq, about seven
stocks fell for every one that rose.
