Financial Stocks Fall, Pull Down Markets
Financial services stocks were among the biggest losers Tuesday, as a rising tide of concern over accounting practices drove Wall Street to one of its worst days since the Sept. 11 terrorist attacks.
A Standard & Poor’s index of 17 major financial services stocks fell 4.9% as Citigroup lost $2.60 to $46.71, J.P. Morgan Chase fell $2.26 to $32.05 and Merrill Lynch lost $3.96 to $49.
The financial sector contributed most of the drop in the S&P; 500 index, which fell 32.42 points, or 2.9%, to 1,100.64--its biggest one-day loss since the first week of trading after the terrorist attacks. The S&P; now is at its lowest level since Nov. 2.
The Dow industrials fell 247.51 points, or 2.5%, to 9,618.24, the biggest decline since late October. The Nasdaq composite index lost 50.92 points, or 2.6%, to 1,892.99.
More than two stocks fell for every one that rose on Nasdaq and the New York Stock Exchange. Trading was active.
Meanwhile, yields on long-term Treasury bonds dropped sharply as investors fled the stock market for the security of government debt, and as traders bet that the Federal Reserve will keep short-term interest rates low for the time being. The yield on the benchmark 10-year Treasury note fell to 4.94% from Monday’s close of 5.07%.
The Fed, which began a policy meeting in Washington Tuesday, is expected today to announce it is leaving its benchmark rate unchanged at 1.75%, a 40-year low.
But the Fed meeting took a backseat Tuesday to worries over the way corporations report their earnings--fears that have been growing since Enron’s bankruptcy filing. Tyco International, PNC Financial Services, Cendant and Williams all fell on worries the companies face accounting controversies.
“Today is a day when the market is greatly driven by fear--fear of exposure to bankruptcy or to accounting irregularities,” David Katz, fund manager at Matrix Asset Advisors, told Bloomberg News.
Shares of financial services firms--which include banks and brokerages--fell on worries that investors will trade less if the market continues to fall, analysts said. An ongoing decline also would make it less attractive for companies to sell new securities, a big source of revenue for investment banks.
Among banks, Bank of America lost $4.44 to $59.20 and Wells Fargo slid $1.43 to $45.72.
The dive by stocks overshadowed reports showing that consumer confidence rose for the second straight month and orders for durable goods rebounded in December, providing hope that a rise in capital spending will spur economic growth in coming months.
Tuesday’s sell-off also brought the S&P; 500’s year-to-date loss to 4.1%. With only two trading days left in January, it is becoming more likely that the benchmark index will show a loss for the month. That would be considered significant by adherents to the so-called January barometer, which decrees that the market’s performance in January is usually an indicator of how it will fare for the full year.
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In other market highlights:
* IBM was a drag on the Dow, falling $5.15 to $103 after it said Louis V. Gerstner Jr. will step down as chief executive March 1.
* Oil stocks sank as crude oil fell for the first time in seven sessions. Exxon Mobil fell $1.01 to $37.95. ChevronTexaco slid $3.70 to $85.17 after reporting a fourth-quarter loss.
* American International Group dropped $3.83 to $72.84. Chairman Maurice “Hank” Greenberg said the company would face fourth-quarter write-offs related to Enron securities, but he said they are “nothing significant.”
