Stocks extend declines as bank worries persist

Associated Press

Wall Street pulled off a big turnaround Thursday, rebounding from a steep early drop to finish modestly higher.

Some investors who began the day worrying about a revival of the banking crisis grew optimistic during the session that the government will again help the financial industry.

The sell-off, which followed news that Bank of America needed another government cash infusion, had the Dow Jones industrials heading for a seventh straight loss.

But investors awaiting a Senate vote clearing the way for the second $350 billion from the government’s $700-billion financial bailout fund became more upbeat as the day wore on, hoping that additional money from Washington would help stabilize banks. Lawmakers approved the money after the market closed.

Late Thursday, Bank of America and the Treasury Department were near an agreement that would provide $15 billion to $20 billion in new government support to the Charlotte, N.C., banking giant, a source close to the discussions said.


The market’s zigzag Thursday was reminiscent of the volatility seen in September and October, when worries about mounting troubles at banks and the collapse of brokerage Lehman Bros. Holdings Inc. pummeled Wall Street.

Swings of hundreds of points in the Dow industrials were at times terrifying but began to feel almost commonplace. Wall Street has shown relative tranquillity since late November but still remains in a bear market, which can produce sharp turns.

Wall Street is nervous that the money already given to banks in the fall has done little to repair their balance sheets. Bank of America, which acquired Merrill Lynch on Jan. 1, late Thursday said it would report its quarterly results today rather than next week as planned.

There are also expectations that Citigroup will be announcing further steps to slash costs and reduce its size because of its financial problems and that other banks could require more government help.

The Dow ended the day with a gain of 12.35 points, or 0.2%, to 8,212.49 after falling the last six days. The index was down as much as 205 on Thursday and briefly slipped below the 8,000 mark for the first time since Nov. 21, a day after the blue chips closed at their lowest level in more than five years.

Broader stock indicators advanced Thursday. The Standard & Poor’s 500 index rose 1.12 points, or 0.1%, to 843.74, and the technology-heavy Nasdaq composite index rose 22.20 points, or 1.5%, to 1,511.84.

The Russell 2,000 index of smaller companies surged 2.1%.

Tech and small-cap stocks are often among the first places investors start buying when they think a recovery is at hand.

The Dow’s bounce off the 8,000 level was a welcome move by traders hoping stocks can remain above their November lows.

At their weakest point Thursday, the Dow and the S&P; 500 index were down more than 11% in seven sessions. The number of stocks rising on the New York Stock Exchange outpaced those declining by about 8 to 7. Early in the session, decliners led gainers by 10 to 1.

The Bank of America news more than offset better-than-expected first-quarter earnings reported by JPMorgan Chase.

But bank stocks still finished down on the day. Bank of America fell 18%, Citigroup lost 15%, Morgan Stanley dropped 5.4%, and JPMorgan slid 6.1%.

Oil prices fell along with stocks. Crude futures slipped $1.88 to $35.40 a barrel.

The dollar was mixed against other major currencies, while gold prices rose.

Overseas, key stock indexes fell 1.4%, 1.9% in Germany, 1.8% in France and 4.9% in Japan.