Updated from 3:06 p.m. EST
Stocks in New York sealed an awful February with modest losses on a no-good, very-bad news day, on which GE cut its dividend, and the U.S. government took a greater stake in Citi and reported a surprisingly bad GDP reading for the end of 2008.
Led by battered financials, the
Dow Jones Industrial Average
fell 113.73 points, or 1.6%, to 7068.35. The
gave up 17.11 points, or 2.3%, to 735.72, undercutting its Nov. 20 intraday low of 747.78. After flirting with positive territory throughout the day, the
sank 13.63, or 0.1%, to 1377.84.
In the latest bit of news,
said it will cut its dividend from 31 cents to 10 cents a share. The move, unconfirmed by GE, was not entirely unexpected, as company comments that it would "evaluate" the dividend had left investors speculating. Shares were recently down 5.9%.
With shareholders fretting over potential government dilution of
shares, the bank led the
decliners, losing 37%, with
Bank of America
registering a 20% drop itself. The KBW banking index was off by 7.8%.
"With the Dow below 7,100, from a technical perspective, it looks like 6300 is the next price point," says Anu Sharma, managing director of the market intelligence desk at Nasdaq OMX. "We saw short-interest jump up last month, and I wouldn't be surprised to see it again this month; If you're a long investor, you continue to stay away from the market right now.
But, Marc Pado, U.S. market strategist for Cantor Fitzgerald, believes there is something keeping the shorts at least somewhat at bay. Specifically, Treasury Secretary Tim Geithner has promised to deliver more details on the bank bailout plan in a several-week period that's now winding down. The missing piece, says Pado, is how the government is going to price the bad assets that it will take off banks' hands.
Pado points out that the previous two times the market anticipated this information from Geithner, the market rallied -- of course, only to tank when it was clear those details weren't being released. "Once that information is put aside, the market could move higher," he says.
Chipping away at market optimists, a Commerce Department report on Friday showed the
contracted at a whopping 6.2% annualized pace at the end of 2008, the worst figure in a quarter-century, as the country sinks deeper into recession.
The economy shriveled faster than the government's first estimate, which predicted a 3.8% decline. It was also noticeably worse than the 5.4% annualized decline economists expected.
"Increasingly it's impressive that despite the most horrifically bad string of persistently terrible news, we're not falling hard below the November lows," said James Paulsen, Chief investment strategist, Wells Capital Management.
"The entirety of stocks, bonds and commodities are stabilizing," says Paulsen. Now it's Main Street that's in freefall, he says, "But the best news is that Wall Street is stabilizing, which says that Main Street may be stabilizing thereafter," he says.
"When the banks report horrible quarterly earnings and write downs, and the stocks go up, the rest of the market is going to get really excited," says Cantor Fitzgerald's Pado. "The sign of a bottom is when companies report really bad news and the stock goes up - it's a sign the worst is already there." But, we're not there yet.
The other big news Friday morning was that beleaguered
in which it will convert $25 billion of the $45 billion in emergency bailout money that it has already pledged to Citi from preferred shares into common shares in return for a 36% stake in the bank.
Investors worried about the dilution of their positions, sent shares plummeting. The government also gave Citigroup the opportunity to seek additional government funding or for the conversion to common shares of the remaining $20 billion in federal bailout money it received late last year.
In other banking news, San Francisco-based
to five top executives, including CEO John Stumpf, because performance goals were not met in 2008.
The Blackstone Group
also said its chairman and CEO Steve Schwartzman
, following the lead of other banks like
JP Morgan Chase
The firm, which lost $827 million in the fourth quarter, also announced it would not pay a dividend to investors in its "units."
Taking a quick look at tech, a Japanese mobile phone operator has stopped selling
Research in Motion's
because of overheating problems
during battery charging. Research in Motion's shares were rising some 1.4% in recent trading, nonetheless.
was also up 2% on Friday
Friday after it said its putting the reins in the hands of the Chief Executive Howard Stringer, a Welsh-born American and the first foreigner to head Sony Corp. Stringer will take on the role of president with the task of reorganizing the electronics and game businesses as they struggle with dragging sales and the economic downturn.
A bit of good news, in the auto sector no less,
said Friday it will resume production at its Cleveland Engine Plant No. 1, which has been idle since 2007, to build the company's new fuel-efficient EcoBoost engines.
Investors largely overlooked a trio of worse-than-expected economic data early Thursday, but indicators continued to stroll in Friday. The Chicago purchasing managers index for February ticked up to 34.2, from 33, while the University of Michigan consumer sentiment index for the month came in at 56.3, roughly in line with preliminary estimates and down from 61.2 in January. Both were near to expectations.
The Economic Cycle Research Institute's weekly leading index was negative 24.1%, nearly unchanged from a week prior.
In commodities, oil fell $1.18 to $44.04. Longer-dated Treasuries were recently on the uptick; the 10-year note was rising 15/32 to yield 2.9%, the 30-year was higher by 19.5/32, yielding 3.6%. The dollar was slightly weaker against the yen, and stronger vs. the pound and euro.
Stocks abroad were mixed. The FTSE in London and the DAX in Frankfurt were up 1% to 3%, after Japan's Nikkei and Hong Kong's Hang Seng ended with losses.