MW: Stocks fall as firms detail exposure to Madoff
By Kate Gibson & Nick Godt, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks fell on Monday, with shares of financial firms weighing on the broader market as a number of firms detailed their exposure to the alleged $50 billion fraud by Bernard Madoff.
Madoff, a former chairman of the Nasdaq Stock Market, was arrested and charged with securities fraud on Thursday in what prosecutors described as a Ponzi scheme that might involve more than $50 billion.
"What's amazing is the magnitude of bad news that we've had to digest during the last two weeks, but still the market remains resilient," said Art Hogan, chief market strategist at Jefferies & Co.
After climbing two out of the past three sessions, the Dow Jones Industrial Average finished off its lows, down 65 points, or 0.8%, at 8,564, with 20 of its 30 components posting losses. The blue-chip average earlier fell to a low of 8,469.
Financials weighed the most on the blue-chip index, with J.P. Morgan Chase & Co. off more than 7% and American Express Co. down 5%. Bank of America Corp. lost more than 1% and Citigroup Inc. fell nearly 4%.
As more details of the alleged fraud by Madoff emerged, Banco Santander SA said its customers had an exposure of about $3.1 billion through its Optimal asset-management business, while Japan's Nomura Holdings Inc. said it had an exposure of about $302 million.
The S&P 500 Index fell 11 points to 868, with telecommunications falling the most, off 4.2%, followed by the financial sector, which fell 3.6%.
The bigger laggards among financial shares included Developers Diversified Realty Corp. , off 17%, and ProLogis, down nearly 10%.
Energy-sector gains mostly faded as crude-oil futures turned lower. Both Anadarko Petroleum and Peabody Energy Corp. finished modestly higher but well off earlier highs.
Crude futures lost early gains after rallying sharply last week ahead of a meeting of the Organization of Petroleum Exporting Countries on Wednesday. OPEC is now widely expected to cut production again. Light crude for January delivery finished down $1.77, or 3.8%, at $44.51 a barrel on the New York Mercantile Exchange. Read Futures Movers.
The Nasdaq Composite Index shed 32 points to finish at 1,508.
The dollar fell sharply against other major currencies, with the dollar index off more than 1% at 82.02. See Currencies.
"The uncertainty surrounding the fate of the U.S. auto industry, coupled with the market's expectation of an imminent Fed rate cut on Tuesday, pressured the dollar to start the week in a distressed state," said Rebecca Lia, a currencies analyst with Wachovia Corp.
The Wall Street Journal reported Monday that the Bush administration is sizing up what terms to seek from the auto industry in return for a bailout, including whether to push the companies to file for bankruptcy.
The White House is discussing a rescue totaling $10 billion to $40 billion or more, the Journal reported. "We've gone from expecting to hoping," said Hogan of the efforts to shore up the embattled industry.
Shares of both General Motors Corp. and Ford Motor Co. finished higher.
Volume on the New York Stock Exchange topped 1.2 billion, with decliners overtaking advancers nearly 3 to 1. On the Nasdaq, more than 668 million shares traded, and decliners beat advancers by more than 2 to 1.
Low housing morale
In economic news, the National Association of Home Builders said its housing-market index stayed at a record low in December, with fewer than 1 in 10 builders believing the market is good. See full story on home builders.
Separately, the December Empire State Index, the gauge of manufacturing activity in the New York region, contracted at a record pace in November.
In a separate report, the Federal Reserve said output of the nation's factories, mines and utilities declined 0.6% in November on broad-based weakness across manufacturing industries. Read Economic Report.
Investors also looked ahead to Tuesday's Federal Reserve interest-rate decision, where rates are expected to come down half a point to 0.5%. See Economic Preview.
"The FOMC meeting should be overshadowed this week by earnings from Goldman Sachs Group on Tuesday and Morgan Stanley on Thursday," said Marc Pado, U.S. strategist at Cantor Fitzgerald.
Former Dow component Honeywell International Inc. shares rose 6.3% after the industrial company reaffirmed its full-year outlook. See full story.
Late Sunday, Huntsman Corp. ended its agreement to be acquired by Hexion Specialty Chemicals Inc. and reached a settlement over litigation. Huntsman said it is due payments totaling $1 billion.
In international markets, Japan's Nikkei 225 rose 5.2% while Germany's Dax index fell 0.2%.
Stocks on Friday erased early losses to close higher after the Bush administration said it would step in to prevent a failure of U.S. automakers, amid fears that more job losses would deepen the recession.
