Wall St falls on ISM factory data, mortgage doubts

By Ellis Mnyandu

NEW YORK (Reuters) - U.S. stocks fell on Monday after fresh data pointed to a weakening manufacturing sector and uncertainty surrounded emerging plans to shore up the mortgage market.

Industrial companies dragged the market lower after the Institute for Supply Management said its index showed factory activity in November fell to its lowest since January, driving down shares of bellwethers such as General Electric (GE.N: Quote, Profile, Research, Stock Buzz).

Investors had a mixed reaction to a U.S. government proposal to stem mortgage defaults by freezing interest rates on adjustable rate mortgages made to subprime borrowers, with some seeing the plan as the first step in staunching the housing crisis while others said the plan raised more questions than it answered.

"When people see the government getting involved in another program that has good intentions, people tend to get very skeptical," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.

"Firstly, how is this plan going to be taken advantage of by people who don't have a legitimate call on that help and secondly, when is the government going to step out of their temporary role, if ever?"

The Dow Jones industrial average .DJI fell 57.15 points, or 0.43 percent, to end at 13,314.57. The Standard & Poor's 500 Index .SPX dropped 8.72 points, or 0.59 percent, to close at 1,472.42. The Nasdaq Composite Index .IXIC dropped 23.83 points, or 0.90 percent, to finish at 2,637.13.

Treasury Secretary Henry Paulson said his department was close to working out a plan with the mortgage industry to move many troubled subprime borrowers into more sustainable home loans.

Even so, concerns about the economy's health weighed on equities. GE shares were the top drag on both the Dow and the S&P 500, finishing down 3.6 percent at $36.93 on the New York Stock Exchange.