U.S. Stocks Drop, Led by Banks

U.S. stocks fell for a fifth day, the longest losing streak since January, after Bank of America Corp. slashed its dividend to shore up capital and concern grew that real-estate companies will default on debt.

Bank of America Corp. tumbled 18 percent after cutting its payout in half and saying it plans to sell $10 billion in common stock to brace for a recession. Morgan Stanley, KeyCorp and JPMorgan Chase & Co. each slid more than 5 percent. General Growth Properties Inc., a Chicago-based mall owner, plunged 52 percent, while American Investment and Management Co., an owner of apartment complexes, lost 20 percent.

The Standard & Poor's 500 Index decreased 19.7 points, or 1.9 percent, to 1,037.19 at 1:06 p.m. in New York. The Dow Jones Industrial Average lost 157.78, or 1.6 percent, to 9,797.72, a day after falling below 10,000 for the first time in four years. The Nasdaq Composite Index slipped 2 percent to 1,825.65. Three stocks fell for each that gained on the New York Stock Exchange.

Stocks opened higher after the Federal Reserve invoked emergency powers to create a special fund to buy commercial paper, which is short-term debt issued by corporations to fund operations. Banks and real-estate companies then led the market lower as the S&P 500 Financials Index slumped below its lowest closing level since 1997.

Canadian stocks rose for the first time in five days, as commodities rallied and raw materials producers led a rebound from a three-year low in the main equity index. The Standard & Poor's/TSX Composite Index rose 0.3 percent to 10,262.79 at 11:54 a.m. in Toronto.

European stocks swung wildy in volatile trade on Tuesday as fears that banks need additional funding sent financial stocks tumbling. Germany’s Xetra Dax added 0.5 per cent to 5,415.42 and in France the CAC 40 outperformed the wider market rising 1.9 per cent to 3,782.64. In London, the FTSE 100 gained 1.3 per cent to 4,647.6.

Russian stocks fell, extending yesterday's record drop, as a plan by President Dmitry Medvedev to lend $36 billion to banks wasn't enough to convince investors the government can halt its worst financial crisis since 1998. The Micex Index fell 4.5 percent to 717.83, after losing 19 percent yesterday to the lowest since August 2005.

Asian shares pared declines today after Australia's central bank reduced interest rates by the most since 1992.

Japan's stocks slumped, sending the Nikkei 225 Stock Average to its lowest close in almost five years, as the seizure in credit markets curbed demand for the nation's exports and threatened to worsen the economic slowdown. The Nikkei Average fell 317.19, or 3 percent, to close at 10,155.90 in Tokyo after dipping below 10,000 for the first time since Dec. 10, 2003. The broader Topix index dropped 21.44, or 2.2 percent, to 977.61. More than four stocks retreated for each that gained on the gauge.

Australian stocks rallied and bonds jumped after the nation's central bank cut benchmark interest rates by one percentage point, the biggest reduction since 1992. The S&P/ASX 200 Index added 1.7 percent to 4,618.70 at the close in Sydney, reversing an earlier loss of 0.5 percent immediately before the decision. The index has lost almost a third of its value this year amid a credit freeze triggered by the U.S. subprime mortgage crisis.

Indian stocks fell, with the benchmark Sensitive Index holding at a 2-year low on concern surging credit costs will deepen a global slowdown. The Bombay Stock Exchange's Sensitive Index, or Sensex, slid 0.9 percent to 11,695.24. The index held at its lowest since Sept. 12, 2006.

China's stocks fell for a second day, led by raw-material and energy companies, extending a global rout after commodity prices slumped and Aluminum Corp. of China Ltd. forecast a profit decline. The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, declined 26.25, or 1.2 percent, to 2,102.45 at the close. It dropped 5.1 percent yesterday.

TradingEconomics.com, Bloomberg
10/7/2008 10:53:39 AM