The Overnight Report: US Stimulus Bill Doesn't Stimulate

Earlier in the day, the Dow oscillated between positive to negative and was marked by a mid-morning rally that saw the Dow run 60 points after the White House said President Obama will outline a foreclosure plan on Wednesday, but there were few details. In the end, the indecision about the stimulus plan and a continued stream of poor economic data was more than the market could overcome.

The Dow Jones industrial average ended up closing 82 points, or just over 1% lower, seeing it finish below 8,000 for the fourth session in a row. All but three of its 30 stocks declined. The S&P 500 was also down 1%, while the Nasdaq ended 0.5% lower after spending a good part of the day in the black.

Market breadth was negative and volume was pretty light ahead of the long holiday weekend. All US financial markets are closed on Monday for Presidents Day.

The Reuters/University of Michigan consumer sentiment index, out in the morning, showed a bigger fall than expected, sliding to 58.2 from 61.2 in January. That news, coupled with the continued lacklustre run of corporate results, made it difficult for markets to find any solid footing to rise from.

Bank stocks provided much of the downward pressure on the broader market,with a 5.7% decline in JP Morgan Chase setting the pace for the sector. Energy companies and industrial shares helped offset some of the banking sector's declines, but the help was far from enough.

The financials hit the skids early after British banking company Lloyds Banking Group said that it would take a big loss in its HBOS business. US shares in the UK giant tumbled 30% and pulled US lenders lower with it. Bank of America and Wells Fargo, which reported late on Thursday its fourth-quarter loss would be deeper than originally reported, declined 5.1% and 6.2%, respectively.

But it wasn't really a day about stocks, it was much more a day about philosophical beliefs. Is government intervention good? Will the stimulus package actually help, or will it eventually come back and kick us in the behind? Optimism about the home loan plan was a definite feature of the day, but more so was indecision, then fear, then optimism, then fear again when it came to the passage of the stimulus package.

One thing's for sure, the rules of the game are changing on a daily basis and investors seem reluctant to take any sort of long-term position on stocks. And that seemed to be the problem with the passage of the bill. What should have been perceived as good news was actually taken as bad, given much of the spending is scheduled so far into the future that it wont give the short-term economic boost that is hoped for.

Oil futures rebounded 10% after a five-session slump as investors looked to buy the benchmark contract after five consecutive sessions of declines that had sent oil to a two-month low. Short covering had a lot to do with the rise, as investors who had been shorting the March contract were also buying back the contract to cover their short positions before the contract expires