Wall Street awaits details of financial recovery plan

NEW YORK (AP) — This week, Washington will get another chance to prove to Wall Street it means business.

Investors are expecting details on the Treasury Department’s plans to fix the financial industry. The questions they want answered: How the government will decide which banks are healthy enough to be saved, how their toxic assets will be priced and how officials will convince private investors to buy them.

President Barack Obama’s administration has yet to galvanize confidence on Wall Street. Last November’s 11-year trading low of 741.02 for the Standard & Poor’s 500 index has not yet been breached — but it could be if the government fails to show the market that its efforts are working and tell them more help is on the way, said Phil Orlando, chief equity market strategist at Federated Investors.

“We could be down 50 percent from here over the next couple of quarters depending on how much Washington disappoints us,” Orlando said. “We’re in this freeze right now. We need something to break this ice jam. Right now, Washington is the only one that has the power to break this jam.”

So far, the multi-trillion-dollar efforts by the Federal Reserve, Treasury Department, White House and Congress have provided only short-lived bursts of optimism in the stock market. Investors, having gotten burned by buying on rumors and selling on news, are now refraining from any major moves until they see reliable, sustained data showing that the economy and financial system are getting back on track.

It’s been a rough couple of weeks for stocks:

UThe Dow Jones industrial average is at its lowest level since October 2002.

UFive Dow stocks are trading below $10 a share — General Motors Corp., Citigroup Inc., Bank of America Corp., Alcoa Inc. and General Electric Inc.

UAfter suffering its worst January ever, the S&P 500 is on track for its third-worst February.

Stocks are so weak because, simply, the economy is not stabilizing and no one knows when it will.

Treasury Secretary Timothy Geithner will have to give the market this week sufficient insight into his plans, and help them figure out whether the industry’s most worrisome players are going to survive. Citigroup and Bank of America plummeted last week on worries that the two banks would need to be nationalized. “A lot will depend on what’s in the plan. Having been disappointed once before, we’re not going to make the same mistake again,” Orlando said.