Stocks Finish Mixed

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Meanwhile, Neel Kashkari, the interim head of the government's $700 billion rescue effort, told the Senate Banking Committee that $250 billion in bank equity injections under the TARP plan are expected to be "out the door" by the year-end. He said he expects the recipient banks to "make loans," but will not put a dollar amount on it since he doesn't want these institutions to be forced into making bad lending decisions by a "one size fits all" approach. Kashkari also said it would be "a few weeks" before the Treasury will announce the next round of banks to receive equity injections.

He also confirmed the Treasury has formally requested the next TARP tranche of $100 billion from Congress, bringing the total to $350 billion out of $700 billion set aside for the program.

A week ago, Treasury Secretary Henry Paulson announced that the program now would have as a major component the purchase by the government of $250 billion in stock in hundreds of U.S. banks, including $125 billion that would go to nine of the largest institutions.

Paulson has said that the fast-moving nature of the crisis convinced him that money needed to get out more quickly as a way to encourage banks to start lending again. But questions have been raised about whether the huge infusion of government money will actually spur more lending, especially after several banks have said they planned to employ the new capital to help finance purchases of weaker rivals.

The Bush administration is weighing a roughly $40 billion proposal to help forestall housing foreclosures, one of a series of ideas under consideration to address the root causes of the financial crisis according to a Wall Street Journal report. FDIC Chairman Sheila Bair is expected to suggest at a Senate Banking Committee hearing today the government give banks a financial incentive to turn troubled loans into more-affordable mortgages, the paper said citing a person familiar with her testimony.

In economic news Thursday, U.S. initial jobless claims jumped 15,000 to 478,000 in the week ended Oct. 18, from a revised 463,000 the week before (461,000 previously). The four-week moving average slipped to 480,250 versus 484,750.

U.S. foreclosure activity in September rose 21% from a year earlier but fell by double-digits from the prior month as some state laws slowed the foreclosure process, according to a monthly report by research firm RealtyTrac. Notices of default in California fell 51% due to a new law that took effect in September that requires lenders to make contact with borrowers at least 30 days before filing a NOD. The drop in California was significant because the state accounts for nearly one-third of the nation’s foreclosure activity each month, RealtyTrac said.

U.S. monthly home price index fell 0.6% in August, after a 0.8% decline in July (revised from -0.6%), according to the Office of Federal Housing Enterprise Oversight (OFHEO). Declines were widespread, paced by a 1.8% drop in the Pacific region. Only New England posted a gain, up 0.4%. The continued fall in home prices is not surprising and the housing market remains a major source of weakness for the economy, Action Economics said.

Goldman Sachs (GS) plans to cut about 3,260 jobs, a source familiar with the matter said. That represents about 10% of the total staff of the New York-based bank, the source said. Reuters said the bank has so far suffered the least damage in its peer group in the global financial crisis and it remains the leading adviser to mergers and initial public offerings worldwide. But its transition from an investment bank to a traditional bank holding company means the Federal Reserve will use its new regulatory authority to limit the bank's risk taking and encourage longer-maturity funding. Analysts expect Goldman to shrink businesses in prime brokerage and securitization.

The Swedish Central Bank -- the Riksbank -- lowered its repo rate by 50 basis points to 3.75% at today's meeting, a larger cut than the 25 basis points consensus forecast. The central bank said the repo rate is likely to be cut by another 50 bp over the next 6 months. The bank has cut rates by 100 bp this month after hiking 25 basis points in September. The Riksbank revised down its rate path and now sees the repo rate bottoming around 3.2% by the end of 2009. The Bank revised down its GDP forecast to 1.2% and 0.1% for 2008 and 2009 respectively, from 1.4% and 0.8% in September, while CPI is now expected to average 2.1% next year, compared to a 3.2% forecast earlier.

In other U.S. markets Thursday, Treasuries traded mixed in the afternoon, pacing a choppy session in the stock market. The 10-year note fell 05/32

to 103-06/32 for a yield of 3.61%. The 30-year bond rose 24/32 to 108-09/32 for a yield of 4.02%.

The dollar index gave up early gains as oil prices ticked up and was down slightly at 85.39.

December West Texas Intermediate crude oil futures bounced back Thursday to rise $1.40 to $68.15 per barrel. Volatile trading was expected as OPEC officials arrived in Vienna for Friday's special meeting. The cartel is expected to reduce production to stem a steep decline in prices the past three months, with the consensus forecast calling for a cut of 1 million barrels. But Iran is pushing for a 2 million barrel cut.

December gold futures were off $21.20 to $714.10 per ounce as the dollar index rose against sterling and the euro.