Stocks Plunge on Banking Woes
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Just a day after the Federal Reserve said it sees no reason to continue cutting interest rates, an analyst's assertion that Citigroup could face a $30 billion shortfall because of credit market losses reminded investors that the credit market crisis remains far from over.
The result was a 7% drop in shares of Citigroup, a 5% plunge in the Philadelphia Bank Index and a 2.6% drop in the rest of the market, one of the toughest days of what has been a volatile year so far. The Federal Reserve pumped $41 billion into the banking system today, the biggest infusion since Sept. 2001, in an effort to stabilize the banking system. Dow financials J.P. Morgan and AIG lost 6% each and American Express fell 4%.
About the only investors smiling were shareholders of Microsoft, which posted a 0.7% gain on the day, the only one of the Dow 30 to end the day in the green.
Friday will see another important indicator of economic health, the Labor Department's monthly jobs report. Expectations are for a gain of 80,000 or more jobs last month, which could ease fears of an economic slowdown from the credit crunch.
Cisco and EMC lost more than 2% each after saying they would double their investments in China.
Garmin fell 7% on a Merrill Lynch downgrade a day after making a hostile bid for Tele Atlas N.V.
Smith Micro, General Communication and SigmaTel fell on their quarterly results, while Plexus, Spreadtrum Communications and TTM Technologies surged on their earnings reports.
The Nasdaq tumbled 64 to 2794, the S&P plunged 40 to 1508, and the Dow plunged 362 to 13,567. Volume rose to 4.24 billion shares on the NYSE, and 2.61 billion on the Nasdaq. Decliners led by a 28-4 margin on the NYSE, and 24-5 on the Nasdaq. Downside volume was 95% on the NYSE, and 84% on the Nasdaq. New highs-new lows were 78-196 on the NYSE, and 116-247 on the Nasdaq.