Stocks Mixed After Paulson Says Subprime Plan In The Works

NEW YORK (MarketWatch) -- U.S. stocks were mixed Monday amid ongoing worries about the direction of the economy after a gauge of manufacturing activity fell slightly and the government vowed to help some subprime-mortgage holders.

"I think there is concern about overall economic growth, and there is still a lot of concern about financials," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank.

Major indexes pared losses after Treasury Secretary Henry Paulson said the government is working on a plan to refinance loans for some subprime-mortgage borrowers. .

The Dow Jones Industrial Average was recently up 6.9 points at 13,378.6 with 16 of its 30 components trading ahead.

The S&P 500 fell 4.56 points to 1,476.58, while the Nasdaq Composite rose 0.39 points to 2,661.35.

On the New York Stock Exchange, volume topped 524 million and declining stocks outran those advancing about 9 to 7. On the Nasdaq, 839 million shares were exchanged, and declining issues beat those advancing 4 to 3.

The Institute for Supply Management reported its index of business activity dropped to 50.8 in November from 50.9 in October, with a reading above 50 illustrating expansion, and a reading below 50 pointing to a contraction. .

"The 50 reading is great, but it's not enough; directionally we're slowing," said Fitzpatrick.

On the New York Mercantile Exchange, crude-oil futures fell amid ongoing speculation about whether OPEC would raise production quotas later this week. Crude for January delivery declined $1.01 to $87.7. .

The U.S. dollar fell against major currencies, with the dollar index, which measures the greenback against a basket of major currencies, off 0.2%. .

Fed speak

Ahead of the opening bell, Boston Federal Reserve President Eric Rosengren said in a speech that the foreclosure crisis in subprime mortgages will get worse before it gets better.

Rosengren's talk comes ahead of Tuesday's Fed blackout before the Dec. 11 meeting, at which the central bank is slated to make a decision on whether to cut interest rates for a third time this year.

Regardless of Fed moves, "the economy is going to go through a very rough period" not yet reflected in the stock market, said Joe Battipaglia, a market strategist at Stifel Nicolaus. .

U.S. stocks gained last week, helped by comments from Federal Reserve officials that hinted at interest-rate cuts as well as a $7.5 billion injection into Citigroup Inc., with the Dow tallying its third-best week this year.

Active issues

Activision Inc. jumped 17.3% after being snapped up by France's Vivendi SA in a deal to create the biggest video-game maker.

Shares of E-Trade Financial Corp. were down 12.3% after analysts at Bank of America suggested clients sell shares of the brokerage business due to trouble at its bank.

Citigroup was back in the spotlight, saying late Friday it reduced the assets of structured investment vehicles it sponsors to $66 billion from $83 billion, while Moody's Investors Services said it may downgrade the ratings of some of the Citi SIVs.

Overseas, European media shares advanced, while losses from miners and banks kept broader markets in check. .

In Asia, markets ended mixed as weaker capital-spending data weighed on industrials. .

By Kate Gibson