Wall St Stumbles As Bank Fears Resurface

Published: 2009/04/23

NEW YORK: Wall Street sputtered Wednesday in a choppy session as disappointing results from Morgan Stanley reignited jitters about prospects for the bank sector and fears grew on General Motors’ future.

The Dow Jones Industrial Average, which zigzagged over the course of the day, fell 82.99 points (1.04 per cent) to close at 7,886.57, giving back gains of as much as 75 points during the session. The Nasdaq composite managed a small gain of 2.27 points (0.14 per cent) at 1,646.12 while the broad Standard & Poor’s 500 index slipped 6.53 points (0.77 per cent) to end at 843.55.

The market gyrated as investors pored over a large number of corporate results, with a strong focus on the banking sector.

Although Wells Fargo beat forecasts with a record profit, Morgan Stanley disappointed, with a loss of US$177 million. Analysts at Charles Schwab & Co said the financial sector led the decliners “as fear creeps back into the sector, exacerbated by Morgan Stanley’s larger-than-expected loss.”

The market has been keenly following the banking sector, seen as critical to recovery from the credit crunch and severe recession. Elizabeth Harrow at Schaeffer’s Investment Research said “the rally lost steam shortly after the noon hour” after reports that General Motors confessed it would most likely miss a billion-dollar debt payment due June 1. John Ogg at 24/7WallSt.com said trading was “directionless” as the market “made six changes between being up and down.”

“It was very light on the economic calendar today so traders had to use the cumulative earnings as the directional report,” he added. Patrick O’Hare at Briefing.com said despite the negative tone, “there were far more companies that beat expectations than either met or missed them.”

The S&P bank index lost nearly 4.8 per cent Wednesday, as part of the sawtooth pattern of recent sessions as the market tried to assess the health of banks. Morgan Stanley fell 8.97 per cent to US$22.44 after its wider-than-expected loss and Capital One dropped 4.45 per cent to US$14.38 after boosting reserves against losses.

Wells Fargo gave up early gains and fell 3.35 per cent to US$18.18 after its record profit report, while Citigroup edged up 0.31 per cent to US$3.25 and Bank of America fell 5.71 per cent to US$8.26. GM fell 0.59 per cent to US$1.69 after the Wall Street Journal quoted a GM executive as saying the struggling automaker is likely to miss an upcoming debt payment.

Among other stocks in focus, Boeing overcame early weakness and rose 1.77 per cent to US$37.30 after it reported profits fell 50 per cent in the first quarter and cut its forecast for the rest of 2009. McDonald’s fell 2.48 per cent to US$54.25 as the fast-food leader said profits rose four per cent despite lower revenues. - AFP