Stocks End Mixed Ahead of Election

Disheartening data on manufacturing, construction spending, and auto sales weighed on equities Monday

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U.S. stocks ended mostly lower on Monday with swings confined to a fairly narrow trading range before Tuesday's U.S. presidential election and a heavy dose of economic reports later in the week, according to S&P MarketScope. The market gave up earlier gains as traders digested a report that Ford Motor Co.'s (F) October vehicle sales skidded 32.7% and two downbeat economic data releases: October's ISM manufacturing index fell to 38.9 from 43.5 in September, while U.S. construction spending fell 0.3% in September.

On Monday afternoon, the Dow Jones industrial average closed 5.18 points, or 0.06%, lower at 9,319.83. The broader S&P 500 index added edged down 2.45 points, or 0.25%, to 966.30. The tech-heavy Nasdaq composite index gained 5.38 points, or 0.31%, to finish at 1,726.33.

On the New York Stock Exchange, 16 stocks advanced in price for every 13 that declined. The ratio on the Nasdaq was 14-12 positive. Consumer staples stocks were among the best performers of the session, while energy and retailing stocks that showed gains last week came back down on profit-taking.

Governments around the world continued their efforts to combat the global financial crisis. South Korea pledged more cash to rev up its economy, and central banks in Europe and Australia looked set to cut rates again in a frantic battle to keep the financial crisis from shoving the world into its worst slump in decades, according to a Reuters report. Seoul announced $11 billion in new spending and tax cuts. Dismal Australian economic data cemented expectations that its central bank will slash interest rates on Tuesday.

In Europe, the Bank of England and the European Central Bank have both primed investors for another round of cuts later this week. The U.S. Federal Reserve and central banks in Japan, China and India all cut borrowing costs last week in an effort to shield their economies from the fallout from the crisis, which started when the U.S. housing boom turned sour 15 months ago. But economists cited by Reuters say that while trillions of dollars in bank bailouts and stimulus packages may have averted a financial meltdown and may spare the world a repeat of the 1930s Great Depression, the economic outlook is grim.

The Treasury and banking regulators say as many as 1,800 publicly held institutions could apply for government investments in coming weeks, according to a Wall Street Journal report, out of concern that failing to do so could make them losers in a banking sector reshaped by the Treasury's $700 billion rescue plan. Depending upon conditions still being crafted by Treasury, thousands more private banks could apply for government capital as well, a Treasury spokeswoman said Sunday.

The Federal Reserve's Senior Loan Officers' survey showed a record number of banks tightened terms on business loans over the past three months, while demand for loans from households and businesses also declined, Action Economics said. In an interview on Bloomberg TV, Dallas Fed President Richard Fisher said that tight credit conditions are hurting the U.S. economy and "blunting" the impact of Fed rate cuts. He expects zero economic growth through 2009 and admits that inflationary forces have not just subsided, but have been "vaporized." He doesn't see signs of a deflationary trend taking hold, however.

Richmond Fed President Jeffrey Lacker said the U.S. economy is "in a contraction. Up until the summer it was a fairly mild recession," Lacker told reporters after a speech at the Hebrew University of Jerusalem. "I think it's definitely a recession at this point. How deep, how steep, and long it's going to be is uncertain. We don't know if it's going to be a garden variety recession or something steeper. I think it's most likely to be of a fairly moderate size," he said.