Slowdown Fears Batter Stocks
01/15/08 - 05:02 PM EST
Robert Holmes
Updated from 4:19 p.m. EST
Stocks in the U.S. sank Tuesday as sluggish earnings and additional evidence of slowing consumer spending sent the major averages to their lowest closing levels since last spring. The Dow Jones Industrial Average tumbled 277.04 points, or 2.17%, to 12,501.11. It was the largest point decline for the Dow in a month and its worst closing level in nine. The S&P 500 dropped 35.30 points, or 2.49%, to 1380.95, while the Nasdaq Composite slid 60.71 points, or 2.45%, to 2417.59. "It's unfortunate that there was a perfect storm of financials and economic data that sank stocks today," said Art Hogan, chief market analyst with Jefferies. "We may not have this battering every day, as we're pricing in a lot of bad news now." Volume was strong while breadth was weak. On the New York Stock Exchange, 4.49 billion shares changed hands, as decliners beat advancers by a 3-to-1 margin. Volume on the Nasdaq reached 2.34 billion shares, with losers beating winners 3 to 1. Wall Street's downside bias was evident even before the market opened, and when Citigroup (C Quote - Cramer on C - Stock Picks) kicked off the news day, it did nothing to change that. Citi had a fourth-quarter loss of $9.83 billion, or $1.99 a share, nearly doubling the Thomson First Call average estimate. The greater-than-expected loss came after the company recorded a pretax writedown of $18.1 billion because of the subprime mortgage mess. Citi also reduced its dividend by 41% and said it has received a $12.5 billion cash investment from outside investors. Citi shed $2.12, or 7.3%, to $26.94, making it the worst-performing Dow component. At the same time, Merrill Lynch (MER Quote - Cramer on MER - Stock Picks) said it has received a $6.6 billion injection from mostly foreign investors. Merrill, which will post quarterly results Thursday morning, was down $2.96, or 5.3%, to $53.01. "The silver lining is that these lenders look to be getting all the losses off the books and that they are trying to raise capital," said Kenny Landgraf, president and founder of Kenjol Capital Management. "However, it seems like every time we get banking news there is no support for the market. The positive news doesn't carry the same weight as negative news." Traders were also disappointed by earnings reports from U.S. Bancorp (USB Quote - Cramer on USB - Stock Picks) and State Street (STT Quote - Cramer on STT - Stock Picks), both of which reported earnings that declined from a year ago and fell short of consensus targets. U.S. Bancorp tacked on 0.3% after beating estimates, while State Street lost nearly 6%.
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