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By Lucia Mutikani

WASHINGTON (Reuters) - Consumer confidence plumbed historic lows in January and home prices fell at a record pace in November, data showed on Tuesday, highlighting a rapidly deteriorating economy.

Mounting job losses as the year-long recession deepens are piling misery on consumers already grappling with sharp declines in wealth following the collapse of the U.S. housing and stock markets.

Economists say the recession is on track to be the longest, if not the deepest, since the Great Depression.

The Conference Board, an industry group, said its sentiment index fell to 37.7 this month from an upwardly revised 38.6 in December. Wall Street analysts had forecast the index would climb to 39 from a previously reported reading of 38.

"Consumers remain quite pessimistic about the state of the economy," said Lynn Franco, director of The Conference Board Research Center. "Until we begin to see considerable improvements in the expectations index, we can't say the worst of times are behind us."

U.S. stocks brushed aside the grim economic data as some companies reported earnings above market expectations. The Dow Jones industrial average ended up 58.70 points at 8,174.73.

Treasury debt prices, which tend to benefit from news of worsening economic conditions, tapped a safe-haven bid from the data and were also buoyed by speculation the Federal Reserve would announce a purchasing program of long-dated government bonds at the end of its policy meeting on Wednesday.

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Suggesting the economic rout was far from over, the Conference Board's expectations index dropped to 43.0 in January from 44.2 the previous month.

"The adverse feedback loop from extremely tight credit conditions to reduced asset prices and ... reductions in demand for labor services continued to spin at an alarming velocity in January," said Brian Bethune, chief U.S. financial economist at IHS Global Insight in Lexington, Massachusetts.

"The continued ferocity of this negative feedback process highlights the policy challenge that lies ahead."

President Barack Obama, pushing for a $825 billion stimulus package for the distressed economy, on Tuesday expressed confidence the plan would get bipartisan support.

A surge in unemployment and an accompanying rise in job insecurity has led many consumers to defer decisions to buy homes, while costing others theirs. This has resulted in a huge inventory of homes for sale, further depressing prices.

Data from an S&P/Case-Shiller report on Tuesday showed U.S. home prices plunged a record 18.2 percent in November from a year earlier.

Prices in 20 metropolitan areas tracked by the Home Price Index fell 2.2 percent from October. Prices in 11 metro areas fell at record rates from a year earlier, while 14 cities had drops of more than 10 percent.

Analysts said while the report illustrated continued distress in the housing sector, it did not capture measures taken late last year to lower mortgage rates.

"We're still looking at fourth-quarter numbers when the credit crisis was in full swing and before the Federal Reserve took steps to push mortgage rates down," said Gary Thayer, senior economist at Wachovia Securities in St. Louis. "We'll have to watch very closely during the next few months to see if we get a recovery in housing started."

Analysts say restoring stability to the housing market is crucial for the economy's recovery.

The fall in house prices has crimped consumer spending, which accounts for about two thirds of U.S. economic activity.

But housing's downward spiral shows little sign of reaching a bottom soon, with inventories remaining elevated.

The National Association of Realtors said on Monday sales of existing homes rose in December, driven mainly by distressed sales, which saw prices falling on an annual basis by the biggest margin in over 40 years.

"I wouldn't take a lot of comfort in the existing home sales number yesterday because a lot of them were short sales and foreclosed homes," said Keith Hembre, chief economist at FAF Advisors in Minneapolis. "Housing will shave close to three-quarters of a percentage point in fourth-quarter GDP."

The housing meltdown meant retailers continued to suffer sharp falls in sales last week. The International Council of Shopping Centers said sales fell 2.4 percent on a year-over-year basis, the seventh straight weekly decline.

The Fed, which started its two-day meeting on Tuesday, is expected to hold its target range for the key overnight federal funds rate steady at zero to 0.25 percent.

Markets, however, will watch out for further announcements on purchases of mortgage securities or even long-dated U.S. Treasuries.

(Additional reporting by Alister Bull in Washington, Pedro Nicolaci da Costa, Ellen Freilich and Julie Haviv in New York. Writing by Lucia Mutikani; Editing by Leslie Adler)


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