Stocks Tumble amid Economic Fears

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In U.S. economic news Wednesday, the Mortgage Bankers Association said applications to buy homes and refinance mortgages sank 16.6% last week to 408.1. The trade group's purchase index fell 10.9% to 279.3 in the week ended Oct. 17, while its refinancing applications gauge tumbled 23.5% to 1,158.8. A drop in the 30-year mortgage rate of 19 basis points to an average 6.28% rate failed to stem the slide in applications. Underscoring the soft demand for mortgages, the trade group said the U.S. economy is in a recession that will persist until the middle of next year.

Thursday's U.S. economic calendar features weekly initial jobless claims, which are expected to rise 9,000 to 470,000.

In addition to recapitalizing banks, the Treasury is making plans to buy unwanted and illiquid assets from banks in order to help clean up their balance sheets.

Paulson also said Tuesday he aims to intensify efforts to stem foreclosures by using part of the government's $700 billion financial-rescue fund. Paulson told PBS TV's Charlie Rose: "There is clearly more that can be done - - needs to be done." Paulson said he spoke Tuesday with FDIC Chairman Sheila Bair, whom House Financial Services Committee Chairman Barney Frank has proposed to lead a "government-wide effort"' to stem foreclosures. Paulson didn't specify how he plans to help homeowners. In a speech after his interview, Paulson said the Treasury's plan to buy illiquid assets, including mortgages, from lenders gives the government more negotiating power. "We will have more leverage and we'll have more things we can do," he said in response to a question from the audience.

Minneapolis Fed President Gary Stern said the current U.S. economic downturn could be worse than the 1990-91 recession, with growth restrained for as long as one to three years, according to Reuters dispatch. Stern, however, said it is still an "open question" as to whether the current market shocks will push the U.S. economy into a classic recession -- or two consecutive quarters of contraction.

In other U.S. markets Wednesday, the 10-year Treasury note was higher in price at 103-10/32 for a yield of 3.59%, while the 30-year bond rose to 107-20/32 for a yield of 4.05%.

Among other stocks in the news Wednesday, WellPoint (WLP) posted third quarter EPS of $1.60, vs. $1.45 one year earlier 14% fewer average shares outstanding offset a 1.8% revenue decline. The company narrowed its 2008 EPS guidance to $5.43-$5.49 and lowered its operating-revenue forecast by $200 million to $61.7 billion.

Wyeth (WYE) posted third quarter non-GAAP EPS of 90 cents, vs. 90 cents one year earlier, on a 4% rise in worldwide net revenue. The company revised its 2008 EPS forecast to $3.49-$3.55 (excluding certain significant items).

Philip Morris International (PM) posted third quarter EPS of $1.01, vs. 82 cents one year earlier, on a 22% revenue rise. The company reaffirmed its 2008 adjusted EPS forecast of $3.32-$3.38.