By Carla Mozee

Major Latin American markets dropped Thursday, with Brazilian stocks unable to gain traction after a larger-than-expected cut in the country's key interest rate and Mexican stocks absorbing another round of poor economic and corporate-earnings data from the U.S.

Brazil's Bovespa fell 1.7% to 37,894.33, a day after Banco Central do Brasil dropped its benchmark interest rate, the Selic, by 1% to 12.75%. Analysts had widely expected a rate cut of three-quarters of a point.

Mexico's IPC lost 1% to 19,306.73, slicing into its 1.5% gain on Wednesday.

On Wall Street, the Dow Jones Industrial Average (DJI) slumped 1.3%, the S&P 500 (SPX) fell 1.5% and the tech-heavy Nasdaq Composite (RIXF) dropped 2.8%.

U.S. stocks took a series of hits. The Commerce Department said housing starts in December skidded to another record low and the Labor Department reported that last week another 589,000 jobs were lost.

Microsoft Corp. (MSFT) followed up with its notice that it would layoff thousands of workers - for the first time ever -- as it struggles with the impact of the recession. It also posted disappointing quarterly results.

The lack of "guidance on overall visibility for 2009" by many companies as they issue their past quarter's results, said Bruce Zaro, chief technical analyst at Delta Global Advisors, "is making it difficult for analysts to put numbers on what stocks should be selling for based on [future] earnings," and that's creating more uncertainty on Wall Street.

Still, markets outside of the U.S. are "looking to the U.S. for guidance, and when there's no leadership...they sell off and emerging markets are going to follow through with that in a more exaggerated fashion," said Zaro.

Since Jan. 13, the first full trading day after Alcoa Inc. unofficially kicked off the U.S. corporate earnings season, Mexico's benchmark index has declined 8.3%. The Bovespa has lost 4.2% and Argentina's Merval has fallen 6.5%. Chile's IPSA, however, has gained 1%.

In Sao Paulo, banking stocks closed lower. Banco do Brasil fell 1.5%, Unibanco (UBB) lost 2.6% and Itau (ITU) shed 2.8%. Brazil's central bank late Wednesday, exceeded rate-cut expectations as it weighed data showing that the global financial crisis is severely hurting its economic growth prospects.

Brazil's government, in its latest efforts to cushion the impact from lower domestic and external demand and clogged credit markets, launched a credit line of 100 billion reals ($43.17 billion) for companies in need of investment funds, particularly in the natural resources and infrastructure sectors. The credit line will be placed with the Brazilian National Development Bank, or BNDES.

Shares of iron-ore mining heavyweight Companhia Vale do Rio Doce (RIO) slipped 0.5% but closed off session lows after the company's chief executive said that demand for its main product should increase in the second half of the year, according to an Estado newswire report.

In Mexico City, shares of cement maker Cemex (CX) fell 2.5% after its credit rating was cut to junk status by Standard & Poor's. The agency said weakening conditions for economic growth in the U.S., Mexico and Spain will hurt its cash flow and ability to meet debt servicing costs.

Cemex's debt obligations climbed with its $14 billion acquisition of Australia's Rinker Group in 2007.

Shares of Grupo Televisa (TV), however, led advancers with a rise of 7.4% following a settlement of a three-year legal dispute between the broadcaster and Univision over royalties. Financial terms weren't disclosed, but Televisa will receive an increase in payments from a program licensing agreement through 2017.

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