YAHOO [BRIEFING.COM] Stocks fell on Tuesday as economic fears and concerns over corporate earnings overshadowed news of a government plan to help prevent foreclosures.

The S&P 500 was down as much as 3.7%, but pared some losses in the final two hours of the session to settle with a loss of 2.2%. Nine of the ten sectors fell in mostly broad-based weakness.  The material sector (-4.2%) declined the most, while the defensive-oriented utilities sector (+0.2%) outperformed. Volume was below average, with 1.23 billions shares exchanging hands on the NYSE.

Government officials outlined a new mortgage modification plan for loans held by GSEs Fannie Mae (FNM 0.69, -0.03) and Freddie Mac (FRE 0.84, -0.04). The program targets the highest risk borrower who has missed three payments or more, owns and occupies the property as a primary residence and has not filed for bankruptcy.  The borrower's loan payment will then be modified to be affordable, which the FHFA defined as no more than 38% of total monthly gross income.

Earlier in the day, Citigroup (C 10.85, -0.36) announced a plan to prevent foreclosures, which includes the modification of mortgage terms for a group of 500,000 homeowners.

In corporate news, American Express (AXP 22.42, -1.56) received approval to convert into a bank holding company, which will give it greater access to funding and other measures of the Federal Reserve. The Fed waived the normal 30-day supervisory period due to emergency conditions.

Third quarter earnings reports left investors disappointed. KKR Financial (KFN 1.97, -1.31), Las Vegas Sands (LVS 5.25, -2.75), Starbucks (SBUX 10.01, -0.19) and TJX (TJX 23.48, -0.22) missed estimates. Rockwell Automation (ROK 25.97, +1.09) and Tyco (TYC 21.77, -3.57) beat estimates. The latter company, however, gave downside earnings guidance for its fiscal year 2009, according to reports.

Meanwhile, analyst are cutting their earnings estimates on a large number of companies in the face the uncertain economic outlook.  Google (GOOG 311.29, -7.49) had its 2009 and 2010 earnings estimates reduced at Goldman Sachs due to weak macroeconomic and consumer data.

GM (GM 2.92, -0.44) and Ford (F 1.80, -0.13) fell as traders continue to speculate if the automakers will have enough cash to make it through the economic downturn.

Alcoa (AA 10.91, -0.87) led material stocks lower after announcing that it will cut aluminum production by an additional 350,000 metric tons per year, or 8% of annualized output.

In commodity trading, crude prices plummeted 5.8% to $58.84 per barrel on the belief that the global economic slowdown will crimp demand.  Commodities as a whole fell 3.5% as the dollar rose 1.4%.

The bond market was closed in observance of Veterans Day.  It will reopen for normal trading hours on Wednesday.

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