Updated from 2:50 p.m. EST
Stocks in New York continued deteriorate, with financials leading the Dow to a close below 8,000 Tuesday, as Barack Obama was sworn in as president of the United States.
The Dow Jones Industrial Average was off by a rattling 332 at 7949, and the S&P 500 was down 45 points at 805. The Nasdaq was giving up 88 points at 1440.
While the market typically lags on the day of or nearest to an inauguration, Tuesday underwhelmed even Nov. 22, 1963, when Lyndon B. Johnson replaced the assassinated John F. Kennedy and the DJIA retracted 2.9%, noted the Wall Street Journal's MarketBeat.President Obama is taking the helm during one of the most severe economic downturns in the nation's history. "Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age," he said among his remarks in his inaugural address. The 44th president and the first African-American to take the office offered not only a critical and candid view of state of the nation, but also, as was the theme of his campaign, hope. "Today I say to you that the challenges we face are real. They are serious and they are many. They will not be met easily or in a short span of time. But know this, America -- they will be met." Of course, Obama's speech sets the tone for what he's hoping to accomplish in not just the next hundred days but the next few years, said Paul Nolte, Director of Investments for Hinsdale Associates. "But I don't think the markets are paying attention," he said, adding that they are focused on financials, which won't be fixed in the near term. "The banking system is in a world of hurt, and I'm not so sure that just plain old money solves the problem, in that, I think a lot of what has happened and what has already been dispersed is going to have to take time to work its way through the system," he said. Wall Street kept the crises in focus as a lack of confidence continued to batter the financial sector, putting pressure on stocks across the board. Bank of America (BAC), Citigroup (C) and JPMorgan (JPM) fell sharply, leading the decliners on the Dow throughout the day. On Monday, the Royal Bank of Scotland (RBS) forecast a $41.3 billion loss for 2008, and Britain announced a second rescue plan for the country's pained banks, raising concerns that the government might have to further nationalize some British financial institutions. Prime Minister Gordon Brown said that the government has increased its stake in RBS to almost 70%, but wouldn't say whether he believed the bank might eventually be fully nationalized. Last Friday, both Citigroup and Bank of America reported multibillion dollar fourth-quarter losses, with the latter saying it will need more government help in order to digest the acquisitions of Countrywide and Merrill Lynch. FBR Capital Markets analysts cut Bank of America's price target to a mere $5 on Tuesday, writing, "The bottom line is BAC is undercapitalized in our opinion, and valuation should remain under pressure until its capital base is strengthened." BofA will cut as many as 4,000 jobs in its capital markets unit as it consolidates its operations Merrill Lynch, according to the Financial Times. Meanwhile, online broker TD Ameritrade (AMTD) said its first-quarter profit fell 23% and has cut its outlook for the year to adjust to the economic downturn. Also, State Street (STT) opened lower Tuesday after the bank reported a 71% decline in fourth-quarter profit, and gave underwhelming 2009 guidance. Automakers, another sector ripe for bailouts, continued to make headlines. Troubled U.S. automaker Chrysler has sold a 35% stake to Italian automaker Fiat, in return not for cash, but access to Fiat's products and platforms. Fiat has a later option to expand its ownership to a majority stake. As expected, Akio Toyoda, the grandson of Toyota's founder, was named president of the Japanese automaker Tuesday "as it faces what has been said to be its worst crisis in a century." The automaker is forecasting a $1.69 billion operating loss, its first in 70 years, for the fiscal year ending March 31. Longer-dated Treasuries are typically a less-risky alternative when stocks are in retreat, but they, too, were falling on Tuesday; the 10-year note was recently down 13/32 to yield 2.4%, the 30-year was down 2 04/32, yielding 3%. In commodities, oil prices for the February contract, which expires Tuesday, rose $2.23 to settle at $38.74 -- but February was the only month seeing a rise. As the March contract takes over tomorrow it should do so trading near the $3.25 contango level, which could be an early sign that we're starting to see commercial interest coming back into the market, says Darin Newsom, senior analyst at DTN. Gold rose $15.30 to settle at $855.20 an ounce. The dollar was stronger against the euro, pound and weaker against the yen. Stocks around the world were in negative territory. The FTSE in London and the DAX in Frankfurt were lower by 0.4 and 1.8%, respectively, while Japan's Nikkei Hong Kong's Hang Seng ended with losses.
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