By STEPHEN BERNARD and TIM PARADIS
NEW YORK - Wall Street extended its decline today after President Barack Obama released details of his $75 billion mortgage relief plan.
The plan is designed to help stabilize the housing market and reduce foreclosures. Sharp drops in housing prices and sales, coupled with rising foreclosures since the middle of 2007, have been a primary cause of the toughest recession in decades.
The initiative is designed to help up to 5 million borrowers refinance, and provides incentive payments to mortgage lenders in an effort to help up to 4 million borrowers on the verge of foreclosure.
Obama's announcement of the plan comes a day after he signed into law a $787 billion economic stimulus plan he hopes will help revive the economy.
The housing plan, which is more ambitious than expected, is designed to prevent up to 9 million Americans from losing their homes. The effort is aimed at borrowers who owe more on their mortgages than their homes are worth and borrowers who are on the verge of foreclosure.
The plan follows a much worse-than-expected reading on the housing market. The Commerce Department said construction of homes and apartments dropped by 16.8 percent in January to a record low annual rate of 466,000 units. Economists forecast a rate of 530,000 units in January.
Applications for building permits, considered a barometer of future activity, also dropped to a record low, falling 4.8 percent to a rate of 521,000 units.
David Hefty, chief executive of Cornerstone Wealth Management in Auburn, Ind., said investors are questioning the viability of the government's plans to help bolster the ailing banking sector and pull the country out of recession.
"There's a huge lack of confidence in that stimulus package," Hefty said. "It's just (a question of) where does it end and at what point will they address the real problems."
Wall Street is trying to rebound after a terrible Tuesday in which the Dow closed just above its November low as doubts about the recently signed stimulus bill and plans to revive the banking sector continued to weigh on investors.
Tuesday's trading followed sharp declines worldwide as investors realize that a global recovery will be prolonged and government intervention is unlikely to spur quick improvement. Over the weekend, a meeting of Group of Seven finance ministers failed to produce any specific steps to revive the global financial system.
Continued concerns about banks, along with struggling U.S. automakers and cash-strapped consumers sent the Dow tumbling 297.81 points, or 3.79 percent, to 7,552.60 - just 31-hundredths of a point above its post-meltdown Nov. 20 close of 7,552.29, which was its lowest close since March 12, 2003. The Standard & Poor's 500 index fell 37.67, or 4.56 percent, to 789.17.
In the first hour of trading, the Dow Jones industrial average fell 43.24, or 0.57 percent, to 7,709.36.
Broader stock indicators also fell. The Standard & Poor's 500 index fell 5.81, or 0.74 percent, to 783.36, and the Nasdaq composite index fell 10.59, or 0.72 percent, to 1,460.07.