Stocks Slide Another 100 Points

Friday, Feb 20, 2009  |  Updated 3:26 PM CDT
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Blame Them For Your Empty Wallet

AP

Two distressing company reports came as investors are increasingly worried about the weakening banking industry and what the government is doing to stabilize it.

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NEW YORK — Stocks have extended their slide but regained some lost ground after the White House doused fears that the government would nationalize crippled banks.

White House press secretary Robert Gibbs said Friday the Obama administration continues to "strongly believe that a privately held banking system is the correct way to go."

Shares of financial bellwethers Citigroup Inc. and Bank of America Corp. have plunged on worries the government will have take control and wipe out shareholders in the process. Citigroup fell 22 percent, while Bank of America fell 3.6 percent. But the stocks have been down as much as 36 percent during the session.

The Dow Jones industrial average is down 100 at 7,366. The Standard & Poor's 500 index is down 9 at 770, while the Nasdaq composite index is down 2 at the 1,441 level.

Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where volume came to 1.67 billion shares.

The market's slide followed steep drops in other major markets in Europe and Asia. Germany's DAX and France's CAC-40 each fell more than 4 percent, and Tokyo's Nikkei fell 1.9 percent and the Hang Seng in Hong Kong fell 2.5 percent.

Stocks have fallen steadily over the past two weeks as investors lost confidence in multiple Obama administration programs aimed at bolstering the economy. Just this week the government finalized two major initiatives, a massive fiscal stimulus package and a relief plan for homeowners.

"There's perceived disappointment from the lack of clarity from the Treasury (Department) for what it will do with the financial sector," said Wasif Latif, portfolio manager at USAA Investment Management Co. "That's hitting financials regularly."

Both Citi and Bank of America, which also got hammered on Thursday, have been among the hardest hit by the ongoing turmoil in the industry and received multiple multibillion investments from the government.

Citi tumbled 41 cents to $2.10 while Bank of America, which touched a 26-year low earlier in the day, sank 17 cents to $3.76.

As investors dropped out of stocks, safer instruments like Treasury debt and gold rose. The price of the benchmark 10-year Treasury note rose sharply, sending its yield down to 2.72 percent from 2.86 percent. Gold jumped 3 percent to $1,005.60 per ounce.

A pair of poor earnings reports Friday only worsened sentiment about the economy. Lowe's said fourth-quarter profit dropped 60 percent after customers cut back on spending and the company gave a full-year profit estimate that disappointed investors. Department store chain J.C. Penney said profits tumbled 51 percent.

"There's still a big fear factor syndrome," said Michael Strauss, chief economist and market strategist at Commonfund. "There is a focus on what is happening here and now instead of six months to nine months from now."

The Russell 2000 index of smaller companies fell 7.66, or 1.84 percent, to 409.05.

Other world indicators also fell. Britain's FTSE 100 declined 3.2 percent, Germany's DAX index tumbled 4.8 percent, and France's CAC-40 fell 4.3 percent.
   
 

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