Bond insurer plan may inject positive note

By Herbert Lash

NEW YORK (Reuters) - Efforts to rescue a distraught U.S. bond insurance industry could inject a positive note on Wall Street but the economic data and earnings reports on tap for this week are unlikely to change a downward trend for stocks.

Investors this week will get minutes from the January meeting of the Federal Reserve's policy makers, data on January inflation, and a regional Fed gauge of factory activity in February from the U.S. mid-Atlantic region.

Profit reports from top retailer Wal-Mart Stores Inc (WMT.N) and Hewlett-Packard Co (HPQ.N), both slated for release on Tuesday, could provide new insight on consumer sentiment.

However, while clear help for beleaguered bond insurers could spark a relief rally in stocks, there is little on the horizon to break the bearish bias, said Joseph Battipaglia, market strategist at Stifel Nicolaus in Yardley, Pennsylvania.

"The only thing near-term that can give the market some comfort is a comprehensive work-out plan for the (bond) insurers," Battipaglia said. "Outside of that, however, the market is really trendless with no leadership."

"Sentiment is still negative; there's a lack of commitment and conviction on the part of cash buyers to put money to work and the news (this) week is probably not going to excite anybody."

U.S. financial markets will be closed for the Presidents Day holiday on Monday.

Fear of recession and morass in credit markets caused by a slumping U.S. housing sector have spooked investors and kept stocks, especially financials, under water so far this year.

Reports of softer store traffic at Best Buy (BBY.N) in January and a decline in a consumer sentiment index to 16-year lows pushed the Dow and Nasdaq lower on Friday.

However, the benchmark Standard & Poor's 500 Index rose on a rally in food stocks spurred by news of a stake that Warren Buffett's Berkshire Hathaway Inc took in Kraft Foods Inc

(KFT.N).

The Dow Jones industrial average .DJI fell 28.77 points to 12,348.21 on Friday, as the S&P 500 .SPX gained 1.13 points at 1,349.99 and the Nasdaq Composite Index .IXIC fell 10.74 points at 2,321.80.

For the week, the S&P 500 and the Dow both added 1.4 percent, while the Nasdaq climbed 0.7 percent.

The release of economic data generally cause stock market indexes to budge, but the outlook remains lower, said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

"We're still searching for the bottom, but the bottom line; the trend is down," Saluzzi said. "You'll catch your rallies here and there, but right now we're in a down trend."