Stocks flat as bargain hunting offsets economic woe

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By Kristina Cooke

NEW YORK (Reuters) - Stocks were little changed in light volume on Monday as bargain-hunting offset worries about the global economic and profit outlook after Japan became the latest major economy to slide into recession.

Financials led the way lower earlier after Citigroup Inc said it would cut 15 percent of its workforce by early next year. The move was Chief Executive Vikram Pandit's most dramatic yet to restore profitability and bolster a sagging share price but was a bitter reminder of the depth of the industry's problems.

General Motors Corp , however, was a bright spot, rising 12 percent to $3.37, as Congress was set to debate a bailout of the American auto industry. The White House said it will continue to work with Republican lawmakers to determine if help can be extended to the ailing industry this week.

"Financials continue to struggle and this might be a long drawn-out affair. Things have been getting pretty bad out there," said Steve Goldman, market strategist at Weeden & Co in Greenwich, Connecticut.

Adding to the bleak economic picture, a Philadelphia Federal Reserve Bank survey showed private-sector economists believe the U.S. economy fell into recession last spring and that the downturn would last for 14 months.

Data showing Japan, the world's second-largest economy, was in recession added to worries about the breadth and depth of the global downturn. The lack of concrete measures to rescue the world economy emerging from this weekend meeting of the world's 20 largest economies dealt a further blow to investor confidence.

The Dow Jones industrial average <.DJI> rose 3.82 points, or 0.04 percent, to 8,501.13. The Standard & Poor's 500 Index <.SPX> was up 1.08 points, or 0.12 percent, at 874.37. The Nasdaq Composite Index <.IXIC> was down 2.08 points, or 0.14 percent, at 1,514.77.

The S&P financial index <.GSPF> shed 4 percent, while shares of Citigroup, a Dow component, fell 5 percent to $9.02.

Alcoa's shares fell 7.7 percent to $10 after UBS downgraded the U.S. aluminum company, citing uncertainty in the aluminum market.

Investors also dumped technology stocks seen vulnerable to reduced business spending in a global downturn. Microsoft shares fell 0.7 percent to $19.92. Shares of Apple Inc fell 0.8 percent to $89.56.

Target Corp shares shed 0.7 percent to $32.80 after the retailer posted a nearly 24 percent drop in profit as an economic downturn curtails shoppers' ability to splurge on the discount retailer's trendy wares and make payments on its credit cards.

Wachovia Capital Markets cut its 2009 operating earnings estimate on the Standard and Poor's 500 Index <.SPX> to $78.30 per share from $86 per share, citing deterioration in global growth prospects.

U.S. industrial production rebounded by a stronger-than-expected 1.3 percent in October after a downwardly revised September drop, the government said.

(Editing by Kenneth Barry)

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