Stocks have ended the day lower as investors' anxieties over the auto industry gave way to fears about the growing list of firms affected...
NEW YORK — Stocks have ended the day lower as investors’ anxieties over the auto industry gave way to fears about the growing list of firms affected by investment manager Bernard Madoff.
The Dow Jones industrial average was down 65.15, or 0.8 percent, to close at 8,564.53. The Standard & Poor’s 500 index was off 11.16, or 1.3 percent, to end at 868.57, and the technology-heavy Nasdaq composite index was down 32.38, or 2.1 percent, at 1,508.34.
Also weighing on the market are earnings reports later this week from the country’s two largest investment banks, Goldman Sachs and Morgan Stanley.
Stocks had began the day mixed as investors were relieved to hear that President George W. Bush was working on providing short-term government help for the auto industry.
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But as companies including HSBC and Banco Santander revealed exposure to Madoff’s alleged $50 billion Ponzi scheme, investors worried about the ramifications to the beleaguered financial industry.
“The investor psyche is already quite fragile. Scandals like this just add fuel to the fire,” said Alan Gayle, senior investment strategist for RidgeWorth Capital Management.
The fear, analysts said, is that redemptions will increase as investors pull money out of funds to counter their losses in Madoff-related investments. “If you start to see those redemptions building, it’s going to add more selling pressure on the market,” said Quincy Krosby, chief investment strategist at Hartford Financial Services.
Wall Street is also anticipating a bleak earnings report from Goldman Sachs on Tuesday.
“Everybody is nervous they are going to take a huge writedown,” said Dave Rovelli, managing director of trading at brokerage Canaccord Adams.
Analysts are expecting the investment bank to report a loss of $3.50 a share, according to a poll by Thomson Reuters. It would be Goldman’s first quarterly loss since it went public in 1999. Morgan Stanley reports results on Wednesday.
Volume is expected to remain light this week, the last full week of trading this year, ahead of the holidays. Analysts were quick to point out that light volume often skews the market’s moves.
“There doesn’t seem to be a whole lot of activity in the market right now,” said Joe Keetle, senior wealth manager of Dawson Wealth Management. “On small volume, the market can move dramatically one way or the other.”
Investors were hesitant today to make any major moves ahead of the Federal Reserve’s decision on interest rates. Some analysts anticipate policy makers to cut the key rate by a half-point to 0.5 percent on Tuesday, while others expect a three-quarter-point reduction to 0.25 percent — which would be the lowest key rate in records going back to 1954.
“A Fed ease this week has long been anticipated by the market; the only news would be if the Fed did not cut,” Gayle said. He added that the market will probably pay close attention to the statement the central bank releases about the economy and the possibility of future policy actions.
Bond prices edged higher today. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.52 percent from 2.58 percent late Friday. The yield on the three-month T-bill — a safe short-term asset that’s in very high demand — dipped to 0.01 percent from 0.04 percent late Friday.
The dollar fell against the euro and the British pound, but rose against the Japanese yen. Gold prices rose.
Oil peaked briefly above $50 a barrel early in the day, but then fell $1.77 to settle at $44.51 on the New York Mercantile Exchange, after more dour economic news came in from both Asia and the United States.
Markets overseas were mixed. Japan’s Nikkei stock average rose 5.2 percent and Hong Kong’s Hang Seng index rose 2 percent. Britain’s FTSE 100 slipped 0.07 percent, Germany’s DAX index fell 0.2 percent, and France’s CAC-40 fell 0.9 percent.