Dow tumbles 108 points
Stocks retreated Monday, closing sharply lower after the market’s best week in nearly five years as banking and credit card stocks fell in reaction to some downgrades by Wall Street analysts. The Dow Jones industrial average fell more than 100 points.
The decline seemed unaffected by the Commerce Department’s report that U.S. factory orders rose 2.3% in December, the biggest increase since July. Economists had been expecting a 2% increase after a 1.7% gain in November.
The Dow fell 108.03 points, or 0.8%, to 12,635.16.
Broader stock indicators also lost ground.
The S&P; 500 index fell 14.60 points, or 1%, to 1,380.82, and the Nasdaq fell 30.51 points, or 1.3%, to 2,382.85.
The Russell 2,000 index of smaller companies fell 7.04 points, or 1%, to 723.46.
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange.
Stocks were boosted last week by the Federal Reserve’s second interest rate cut in eight days.
For the week, the Dow jumped 4.4%, the Standard & Poor’s 500 index gained 4.9%, and the Nasdaq composite index advanced 3.7%.
In the Treasury market, bond yields rose Monday. The benchmark 10-year Treasury note climbed to 3.64% from 3.59% late Friday.
The dollar slipped against most other major currencies, and gold prices fell.
Crude futures rose $1.06 to settle at $90.02 a barrel on the New York Mercantile Exchange.
Among financial stocks, American Express decreased $1.94, or 3.9% to $47.66 after UBS advised selling the shares, saying a recession would increase credit losses by raising unemployment this year and next.
Other credit card stocks also sank. Discover Financial Services slid $1.62, or 9%, to $16.34. Capital One Financial dropped $4.32, or 7.6%, to $52.65.
Bank shares slumped after Merrill Lynch lowered its recommendations on Wells Fargo and Wachovia to “sell” from “neutral,” citing “rapidly declining California real estate values” and concluding the stocks’ prices didn’t fully reflect the risk of a recession this year.
Wells Fargo fell $2.26, or 6.7%, to $31.39. Wachovia dropped $3.23, or 8.3%, to $35.53. Citigroup dropped 47 cents, or 1.6%, to $29.22, Bank of America slipped $1, or 2.2%, to $44.03 and JPMorgan Chase declined $2.03, or 4.2%, to $46.22.
Shares of bond insurers dropped after Citigroup Global Markets said the industry could lose $34 billion on securities they guaranteed, costing the firms their AAA credit ratings. Ambac Financial Group plunged $1.81, or 14%, to $11.39, the steepest decline in the S&P; 500. MBIA dropped 97 cents, or 5.9%, to $15.39.
In other market highlights:
* Westwood-based builder KB Home plunged $2.34, or 8.1%, to $26.41. Chief Financial Officer Domenico Cecere sold 80,000 shares of the fifth-largest U.S. home builder, according to a regulatory filing. Centex, the second-largest U.S. home builder, fell $2.33, or 8%, to $26.67.
* Wendy’s International fell $1.25, or 5%, to $23.93 after the fourth-quarter profit fell short of expectations. The company didn’t provide an update on its efforts to find a buyer for the hamburger chain.
* Google fell $20.47, or 4%, to $495.43 after the company called Microsoft’s $42-billion bid for Yahoo an attempt to gain illegal control over the Internet. Microsoft fell 26 cents to $30.19, and Yahoo rose 95 cents, or 3.3%, to $29.33.
* Starwood Hotel & Resorts Worldwide surged $2.20, or 4.8%, to $48.39 in after-hours trading after a unit of billionaire real estate developer Sam Zell’s Equity Group Investments bought a 7.7% stake, making Zell the second-biggest shareholder of White Plains, N.Y.-based Starwood. Zell is also chairman and chief executive of Tribune Co., publisher of The Times.
* National Semiconductor fell 62 cents, or 3.3%, to $18.40 in after-hours trading after the chip maker cut its quarterly sales forecast.
* Also after hours, Seagate Technology climbed 61 cents, or 2.9%, to $21.35. The world’s largest maker of hard-disk drives raised its quarterly dividend by 20% and announced plans to buy back as much as $2.5 billion of stock over the next two years.
* Overseas, Asian stocks surged Monday after reports indicated the economic effects from harsh winter storms in China might not be as bad as feared. Key indexes climbed 2.7% in Japan, 3.8% in Hong Kong and 8.1% in the volatile Shanghai market.
In Europe, shares fell 0.1% in France, edged down in Britain and rose 0.5% in Germany.
