NEW YORK (AFP) - US stock markets tumbled heavily in the week to Friday, giving Wall Street a fresh battering, despite Congress granting a green light to a giant economic stimulus package sought by the White House.
The plan, worth around 150 billion dollars, is stuffed with temporary tax rebates and business incentives designed to give the economy a boost, but some analysts say the world's biggest economy is already in a recession.
In the week to Friday, the benchmark blue-chip Dow Jones Industrial Average fell a hefty 4.40 percent to close at 12,182.13. The leading index is down over eight percent for the year to date.
The tech-laden Nasdaq composite lost 4.50 percent to 2,304.85 while the broad market Standard & Poor's 500 index dropped 4.60 percent to 1,331.29.
All three stock barometers have ceded significant ground since last August amid an ongoing housing slump and a related credit crunch which have bruised the earnings of major banks and financial firms.
Debate continues to rage over whether the US economy is in recession or not. Some analysts believe the economy is in recession, while others argue that growth is still positive and some economists remain sitting on the fence.
Growth is being threatened by the housing downturn, the credit crunch, and concerns about the job market and consumer spending.
Although Wall Street appeared to give a cautious welcome to the stimulus plan, which White House officials said President George W. Bush would sign into law in the coming week, some economists say it will give growth a needed boost.
"This fiscal stimulus package meets the key criteria of being temporary, quick and cost-effective. Therefore, it has the basic ingredients necessary to give the economy a shot-in-the-arm in the second half of 2008, and provide a safety net against a more serious downturn in the economy," said Brian Bethune, an economist at Global Insight.
Government officials have said tax rebate checks, ranging from a couple of hundred dollars to over 1,000 dollars depending on family size and earnings, could be in the mail by May.
The Bush administration hopes that Americans receiving the rebate checks will spend the cash and fire up consumer spending, a key economic motor.
"The economy continues to lose momentum and the risk of a recession is high. While the weak data is worrisome, we believe the economy should skirt a recession due to monetary and fiscal stimulus," Ethan Harris, an economist at Lehman Brothers, said in a briefing note.
The Federal Reserve has slashed US interest rates since September in a bid to shore up economic momentum which slowed dramatically to a 0.6 percent annualized crawl in the fourth quarter.
Wall Street money managers said they would be listening carefully next Thursday when Fed chairman Ben Bernanke appears before the Senate Banking Committee to discuss the economy and financial markets.
The Fed's federal funds short-term interest rate is presently anchored at 3.0 percent, but many analysts expect the central bank to unleash fresh rate cuts in coming months.
The economic news calendar picks up in the coming week with releases due on retail sales, the US trade deficit, export and import prices, and consumer sentiment among other reports.
Wall Street will pore over the monthly snapshot on retail sales, due to be released next Wednesday, for clues on consumer spending.
Most economists expect the government report to show that retail sales held flat in January after declining 0.4 percent in December.
Bond prices declined over the week as the yield on the 10-year Treasury bond rose to 3.654 percent from 3.600 percent a week earlier, while that on the 30-year bond jumped to 4.439 percent from 4.318 percent.
Bond yields and prices move in opposite directions.
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