* Stalled U.S. rescue plan sparks anxiety
* Regulators seize WaMu in biggest U.S. bank collapse
* RIM leads tech rout after profit warning
* Dow off 0.2 pct, S&P off 0.8 pct, Nasdaq off 1.2 pct
(Updates to afternoon, changes byline)
By Steven C. Johnson
NEW YORK, Sept 26 (Reuters) - U.S. stocks were lower on
Friday as a $700 billion financial sector rescue ran into
opposition from lawmakers and Washington Mutual became the
largest U.S. bank failure in history.
But with investors still holding out hope that some sort of
deal would be struck on the weekend, the Dow industrials erased
earlier losses to trade little changed.
Technology shares struggled after BlackBerry maker Research
In Motion <RIM.TO><RIMM.O>, a bellwether for the sector, warned
that quarterly profit will fall short of Wall Street's
forecasts. RIM shares shed more than 25 percent.
Wachovia Corp <WB.N> , one of the largest U.S. banks, was
among financial shares taking a hard fall, sinking nearly 30
percent to $9.62
The Dow Jones industrial average <> was down 17.92
points, or 0.16 percent, at 11,004.14. The Standard & Poor's
500 Index <.SPX> was down 9.66 points, or 0.80 percent, at
1,199.52. The Nasdaq Composite Index <> was down 23.00
points, or 1.05 percent, at 2,163.57.
The main focus, though. was the fate of a financial rescue
plan that has run into stiff resistance on Capitol Hill, mostly
from Republican lawmakers. The Treasury wants authority to buy
up assets that banks are struggling to value, but it has been a
tough sell on Main Street, where many voters see it as a
taxpayer-funded bailout of wealthy Wall Street.
Stocks pared losses, however, after President George W.
Bush said Congress would eventually adopt a bailout. Investors
said the market remained nervous about the corporate earnings
outlook and the health of the broader U.S. economy.
"Wall Street is banking on a definitive agreement in place
before markets open on Monday," said Fred Dickson, director of
retail research at D.A. Davidson & Co in Lake Oswego, Oregon.
"The plan is crucial to keeping the economy afloat, but it
isn't going to turn around the housing crisis or pump new life
into the economy. Those are issues we will have to deal with."
On Thursday, U.S. bank regulators closed Seattle-based
thrift Washington Mutual <WM.N>, which had $307 billion of
assets and $188 billion of deposits, and brokered a sale of the
thrift's assets to JPMorgan Chase <JPM.N> for $1.9 billion.
JPMorgan shares were last up 4.7 percent at $45.53.
RIM shares tumbled $25.16 to $72.33 on Nasdaq, while shares
of iPhone-maker Apple Inc <AAPL.O> shed 3.5 percent, or $4.69
to $127.20.
In the energy sector, shares of Chevron Corp <CVX.N> fell
0.9 percent to $86.71 on the New York Stock Exchange as U.S.
front-month crude oil dropped $1.52 to $106.40 a barrel.
Giri Cherukuri, head trader at OakBrook Investments in
Linsdale, Illinois, said investors should be prepared for the
market to turn lower once a rescue deal is finally reached.
Earlier, the Commerce Department said the economy grew more
slowly last quarter that previously thought. A separate report
said the financial crisis had damped a rebound in consumer
sentiment this month.
(Additional reporting by Kristina Cooke; Editing by Kenneth
Barry)
