Админ » 09 окт 2008, 23:20
U.S. Stocks Tumble, Sending Dow Below 9,000; GM, Insurers Slide
By Lynn Thomasson
Oct. 9 (Bloomberg) -- U.S. stocks slid and the Dow Jones Industrial Average fell below 9,000 for the first time since 2003 as higher borrowing costs and slower consumer spending spurred concern carmakers, insurers and energy companies will be the next victims of the credit crisis.
General Motors Corp. tumbled as much as 22 percent, heading for its lowest close in 58 years, and Ford Motor Co. slumped 12 percent. XL Capital Ltd., the Bermuda-based insurer, lost as much as 60 percent on concern investment losses will weigh on results. Exxon Mobil Corp. led the Standard & Poor's 500 Energy Index to its lowest level in two years, while a gauge of financial stocks sank to an almost 12-year low as the three- month Libor rate climbed to the highest of the year.
``Nobody living today has been in a market environment like this,'' said Robert Schaeffer, a money manager at Becker Capital Management Inc. in Portland, Oregon, which oversees $2 billion. ``People are flying blind.''
The S&P 500 retreated for a seventh day, losing 38.46 points, or 3.9 percent, to 946.48 at 3:13 p.m. in New York and capping its longest streak of daily declines since 1996. The Dow Jones Industrial Average declined 292.22, or 3.2 percent, to 8,965.88. The Nasdaq Composite Index decreased 2.3 percent to 1,701.15. Seven stocks fell for each that rose on the New York Stock Exchange.
Worst Slide Since '37
The S&P 500 extended its 2008 tumble to 36 percent, while the Dow is down 32.7 percent. Both are poised for their worst yearly performances since 1937. Banks and brokerages in the S&P 500 lost 2.3 percent today as short sellers returned to the market following a three-week ban by the Securities and Exchange Commission.
U.S. stocks fell yesterday after Treasury Secretary Henry Paulson said more banks may collapse and unprecedented global interest-rate cuts failed to convince investors the economy will avoid a contraction. Paulson signaled the government may invest in banks as the next step in trying to resolve the deepening credit crisis.
The 37 percent decline from its record a year ago today left the S&P 500 valued at less than 19 times the reported earnings of its companies at the start of trading today, the cheapest since February.
Ford slid 27 cents to $2.39, while GM lost $1.12 to $5.78. The automakers may not receive $25 billion in loan guarantees from the U.S. government in time to help them survive the crises in the credit and equity markets, according to the Globe and Mail newspaper, citing a Citibank Inc. analyst.
Insurers Slump
XL Capital plunged 49 percent to $4.40 for the steepest decline in the S&P 500. The company was removed from Goldman Sachs Group Inc.'s ``conviction buy'' list yesterday on ``concern regarding the quality of XL's investment portfolio.''
Prudential Financial Inc. tumbled $7.40 to $35.89, dragging insurers in the S&P 500 to a 5.3 percent decline.
SLM Corp., the education lender know as Sallie Mae, lost $1.36 to $6.49.
The London interbank offered rate, or Libor, for three- month loans rose to 4.75 percent today, the highest level since Dec. 28.
``Everyone's watching the Libor, looking for the credit market to thaw and it's not there yet,'' said Alec Young, a New York-based equity strategist at Standard & Poor's. ``Until you get some convincing thawing in the credit markets, the threat of a global recession and a global profits recession remains and it's going to be difficult for stocks to build momentum.''
Shorts Return
Morgan Stanley dropped as much as 25 percent as the ban on short selling expired and concern escalated that the company may be unable to weather the credit crisis. The SEC imposed the ban on shorting 969 finance-related stocks after Morgan Stanley Chief Executive Officer John Mack and others blamed declines in their shares on traders who borrow stock to bet on its decline.
Banks also slid as the value of high-risk, high-yield loans used to fund leveraged buyouts tumbled amid speculation that more than 1 billion euros ($1.4 billion) of debt is being offered for sale, including assets seized from Iceland's banks.
Iceland's government seized control of Kaupthing Bank hf, the nation's biggest bank, completing the takeover of a financial industry that collapsed under the weight of foreign debt.
Energy Slump
Exxon, Chevron Corp. and ConocoPhillips were among the five biggest drags on the S&P 500. Energy producers in the benchmark U.S. stock index slumped 4.4 percent as a group.
Crude oil for November delivery fell 2.9 percent to $86.38 on concern demand will weaken as the economy slows. The U.S., which consumes 24 percent of the world's oil, is now in a recession, according to a Bloomberg News survey of economists.
Technology companies rose the most among 10 S&P 500 industries, gaining 1.3 percent, after International Business Machines Corp. reported better-than-estimated profit and reaffirmed its earnings forecast for the year, saying results should hold up in the face of the financial crisis. The largest computer-services company climbed 1.9 percent to $92.26 after erasing 23 percent of its value in the six previous days.
Analysts expect a 5.6 percent drop in third-quarter profit at S&P 500 companies, according to Bloomberg data. Alcoa Inc., the biggest U.S. aluminum producer, kicked off the earnings season this week with lower-than-estimated profit, saying net income slid by more than half.
About 965 million shares changed hands on the NYSE at 1 p.m. today, 18 percent more than the same time last week.
Financials Tumble
Financial companies led the S&P 500's retreat from its record a year ago today, losing 57 percent as a group through yesterday as Lehman Brothers Holdings Inc. filed for bankruptcy, American International Group Inc. was seized by the government and Bear Stearns Cos. and Merrill Lynch & Co. were forced into emergency takeovers.
Telephone companies had the second-steepest decline among 10 groups in the S&P 500, dropping 44 percent over the past year. Indexes of each of the other eight industries plunged at least 25 percent, except for companies that sell consumer staples, which lost only 10 percent.
Four companies in the benchmark index for U.S. equities tumbled more than 90 percent over the past year through yesterday: AIG, National City Corp., General Growth Properties Inc. and Wachovia Corp.
The three biggest gains in the bear market came from tobacco, beer and hospital companies: UST Inc., Tenet Healthcare Corp. and Anheuser-Busch Cos. each climbed more than 22 percent over the past year.
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