Recession fears sink Dow
Stocks finished sharply lower Monday after zigzagging throughout the day as investors pored over more signs of economic weakness, including a huge round of layoffs in the financial sector.
After a turbulent week that sent the Dow Jones industrials down nearly 340 points, the index lost an additional 223 points Monday.
In a signal that banks are still struggling in the wake of massive losses tied to bad mortgage debt, Citigroup Inc. said it would remove about 52,000 jobs from its payroll in the coming quarters.
Investors were also nervously waiting to see whether Detroit’s troubled automakers would get a bailout. Senate Democrats planned to introduce legislation Monday that would use funds from the $700-billion financial rescue measure to prop up General Motors, Ford Motor and Chrysler. The Bush administration opposes using those funds to help the carmakers. A vote was expected as early as Wednesday.
GM shares rose 17 cents to $3.18. Ford slipped 8 cents to $1.72.
A better-than-expected reading on industrial production did little to boost the market’s mood. The Federal Reserve said industrial output rose 1.3% last month, after plunging in September by the largest amount in more than 60 years. Economists, on average, had expected an increase of 0.2%, according to a survey by Thomson/IFR.
For most investors, the report wasn’t a concrete enough sign of improvement in the economy, said Anthony Conroy, managing director and head trader at BNY ConvergEx Group.
“I think we’re seeing a tremendous amount of bad economic data,” he said. “Earnings have basically hit a wall and don’t seem like they are coming back any time soon.”
Wall Street was also disappointed by a lack of direction taken to resolve the global financial crisis at the meeting of Group of 20 international leaders in Washington this weekend. However, the leaders did pledge to keep working together to provide loans to financial institutions.
The Dow slid 223.73 points, or 2.6%, to 8,273.58, near its lows of the session.
The Standard & Poor’s 500 index fell 22.54 points, or 2.6%, to 850.75, while the Nasdaq composite index dropped 34.80 points, or 2.3%, to 1,482.05.
The Russell 2,000 index of smaller companies fell 1.1%.
Falling stocks outpaced advancers by a 2 to 1 margin on the New York Stock Exchange.
Monday’s declines followed losses last week of 5% for the Dow, 6.2% for the S&P; 500 and 7.9% for the Nasdaq. The major indexes have fallen for four of the last five sessions.
Target on Monday became the latest retailer to post dour results, citing lower sales at established stores as the reason for a 24% drop in profit. Lowe’s, meanwhile, posted a smaller-than-expected decline in third-quarter profit but predicted that fourth-quarter earnings would fall short of analysts’ forecasts.
Target fell 4.1%, while Lowe’s gained 4.2%.
The reports followed a spate of disappointing earnings and forecasts from companies, including Macy’s, Starbucks and Best Buy, that are feeling the effects of a severe pullback in consumer spending.
Investors fear that Americans’ clampdown on personal spending -- which accounts for about two-thirds of economic activity in the U.S. -- will prolong a worsening economic slump.
The layoffs planned at Citigroup underscored the ongoing distress in the financial sector, which has claimed jobs on all corners of Wall Street.
On Sunday, Goldman Sachs Group said seven top executives, including Chief Executive Lloyd Blankfein, wouldn’t get cash or stock bonuses for 2008. Citigroup’s leaders may also go without bonuses.
An index of financial stocks tumbled 6%, more than any other broad industry group in the S&P; 500. Citigroup fell 6.6%. Goldman sank 6.4%.
Yields on most government debt fell. The yield on the benchmark 10-year Treasury note dropped to 3.68% from 3.74%.
The dollar fell against most other major currencies. Gold prices declined.
Oil prices continued their long slide. Crude futures sank $2.11 to settle at $54.95 a barrel, a 22-month low, on the New York Mercantile Exchange.
Japan’s Nikkei index rose 0.7% despite a report showing the country’s economic output declining for a second straight quarter, signaling a recession.
Elsewhere, key indexes fell 2.4% in Britain, 3.2% in Germany, 3.3% in France and 0.1% in Hong Kong.
