Wall Street ended a painful week with another decline today as skittish investors unable to hold on to much optimism about the economy drew...
NEW YORK — Wall Street ended a painful week with another decline today as skittish investors unable to hold on to much optimism about the economy drew little comfort from President Bush’s stimulus plan.
The Dow Jones industrial average, which was up more than 180 points early in the session, closed down 59.91 at 12,099.30. The Dow plunged 306 points Thursday amid deepening pessimism about the economy.
Microsoft, one of the 30 Dow stocks, slipped 10 cents today to close at $33.01, and was down 2.7 percent for the week. Boeing, also a Dow stock, fell $1.12 today to $78.40, and ended down 2.6 percent for the week.
The broader Standard & Poor’s 500 index fell 8.06 to 1,325.19 today, while the technology-focused Nasdaq composite index dropped 6.88 to 2,340.02.
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For the week, the Dow and the Nasdaq lost 4 percent, while the S&P 500 gave up 5.4 percent. In the 13 trading sessions of 2008, the Dow has lost nearly 9 percent, while the S&P has fallen 9.75 percent and the Nasdaq nearly 12 percent.
The day’s trading reflected how fractious Wall Street has been in the new year. Investors pulled back from a big early advance, with the major indexes trading mixed as Bush began to speak. By the time the president finished announcing a plan for about $145 billion worth of tax relief, the indexes were well into negative territory.
“It’s disappointed in the size of the economic growth package. Wall Street’s showing its displeasure,” said Kim Caughey, equity research analyst at Fort Pitt Capital Group in Pittsburgh. “Honestly, I think the institutional investors understand the limits to the government’s ability to enact economic change.”
Disappointment with Bush’s plan came as investors were searching for those companies that might be weathering the economic slowdown well.
Some are indeed doing better than expected — like IBM, which told Wall Street late Thursday to raise its 2008 profit estimates for the tech company, and General Electric, which posted a fourth-quarter profit rise today.
But many others are struggling. Seattle-based Washington Mutual reported a steep loss late Thursday for the fourth quarter, as Citigroup and Merrill Lynch did earlier in the week. With the banking industry trying to fix its shrinking portfolios and preparing for more distress in consumer debt, the economy may only have the government to fall back on — and Wall Street didn’t hear as much as it wanted from Bush.
Steven Goldman, chief market strategist at Weeden, contends Wall Street remains concerned about whether other economic troubles are lurking.
“It’s a culmination of factors that have been in existence for a while — it’s the unknown,” he said.
Though GE and IBM earnings were promising, he said, “it’s that concern that earnings are OK today, but what about 6 months from now?”
In addition, many investors have been hoping that the Federal Reserve would put in place an intra-meeting rate cut before the central bank’s next monetary policy meeting Jan. 29-30. “The market is saying to the Fed: We want a rate cut and we want it now. The fact that it is not getting a rate cut is causing a lot of selling that is feeding on itself,” said Peter Cardillo, chief market economist at Avalon Partners.
Government bond prices slipped. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.64 percent from 3.63 percent late Thursday.
On Thursday, a dismal reading on the Philadelphia Fed’s manufacturing index and ratings agency downgrades of bond insurers sent the market tumbling. Today, a Bank of America analyst cut its ratings on three bond insurers — MBIA, Ambac Financial Group and Security Capital Assurance — to “neutral” from “buy.”
MBIA fell 67 cents, or 7 percent, to $8.55 after a sharp drop Thursday.
Ambac rebounded from Thursday’s drop, though, rising 34 cents, or 5.5 percent, to $6.58. The company said Friday it will ditch its previous plan to raise $1 billion in capital, a decision many investors considered an ill-advised move to maintain its ratings.
Security Capital Assurance fell 17 cents, or 9.3 percent, to $1.65.
A better-than-expected reading on consumer sentiment came as a pleasant surprise to investors today, but ultimately did not help Wall Street save its early advance. The University of Michigan’s index, which most economists expected to show a decline for mid-January, rose instead. Though not a perfect predictor of consumer spending, the report gave Wall Street some hope that Americans’ buying might not drop off too precipitously amid worries about a recession.
The Index of Leading Economic Indicators, a gauge of future economic activity skidded 0.2 percent in December, registering its third consecutive monthly decline.
The dollar rose against most major currencies, while gold slipped.
Crude oil futures rose 44 cents to settle at $90.57 a barrel on the New York Mercantile Exchange.
The Russell 2000 index of smaller companies fell 7.41, or 1.09 percent, to 673.16.
Meanwhile, chip maker Advanced Micro Devices late Thursday said its fourth-quarter net loss widened, but the loss was smaller than Wall Street predicted. AMD surged 73 cents, or 11.5 percent, to $7.07.
IBM rose $2.30, or 2.3 percent, to $103.40 on its strong forecast.
Washington Mutual rose $1.09, or 8.8 percent, to $13.55. Many investors, in anticipation of an even bigger fourth-quarter loss, had driven the savings and loan’s stock sharply lower Thursday.
In overseas trading, Japan’s Nikkei stock index rose 0.56 percent and Hong Kong’s Hang Seng index advanced 0.35 percent. In Europe, London’s FTSE 100 finished down 0.01 percent, Frankfurt’s DAX fell 1.34 percent and Paris’ CAC fell 1.25 percent.