RTRS: US STOCKS-Wall St tumbles on bank woes, consumer gloom
U.S. stocks tumbled on Wednesday as investors feared more credit losses in the banking sector, while bleak December retail sales compounded worries about the toll on consumers from the deepening recession.
Citigroup (C.N), down more than 15 percent to $4.98, was a standout drag on the financial sector, while shares of JPMorgan (JPM.N) and Bank of America (BAC.N) fell 5 percent and 3.5 percent respectively.
The fall in Citigroup, a Dow component, followed a deal by the embattled bank to sell a controlling stake in its crown jewel unit, the Smith Barney retail brokerage, to Morgan Stanley (MS.N) for $2.7 billion. For more see [ID:nN13422148].
Analysts reckon the Smith Barney sale was a precursor to a break-up of Citigroup and that the bank must be urgently seeking to replenish capital due to mounting losses.
"You'd think the news on banks is baked in, but there's still a lot of headwinds," said Rich Parker, head of trading, Stanford Group, in New York.
"The write-downs are starting to really scare people outside of the banking area as well. Is there a balance sheet out there that you can really trust? By all indications, it seems the recession is going to be a historically long one."
The Dow Jones industrial average .DJI slid 277.01 points, or 3.28 percent, to 8,171.55. The Standard & Poor's 500 Index .SPX tumbled 29.99 points, or 3.44 percent, to 841.80. The Nasdaq Composite Index .IXIC dropped 48.07 points, or 3.11 percent, to 1,498.39.
The sell-off marked another hindrance to the market's push to recover from its November bear market low. The benchmark S&P 500 began 2009 up more than 20 percent from that low but is now up about 11.5 percent. The S&P financial index .GSPF fell nearly 6 percent.
Sales at U.S. retailers fell 2.7 percent in December, government data showed on Wednesday, as a deteriorating economic climate forced consumers to cut back on spending during the key holiday period. [ID:nN14448423
Consumer spending accounts for about two-thirds of U.S. economic activity and as such is a key pillar of corporate profits. The S&P retail index .RLX declined 3.7 percent.
Investors also sold off shares of economic bellwethers including big manufacturer Caterpillar Inc (CAT.N), down 6 percent. On Nasdaq, shares of iPhone maker Apple Inc (AAPL.O) led the slide, falling 2.4 percent to $85.64.
