Anticipating Poor Earnings Reports, Investors Pull Back
Tuesday, January 13, 2009
NEW YORK, Jan. 12 -- Wall Street extended last week's slide Monday as investors worried that the quarterly results companies begin releasing this week will signal the economy is in worse shape than feared.
The Dow Jones industrial average fell 125.21, or 1.5 percent, to 8473.97 after being down as much as 178 points in the final hour of trading. Broader stock indicators also declined. The Standard & Poor's 500-stock index fell 20.09, or 2.3 percent, to 870.26, and the tech-heavy Nasdaq composite index fell 32.80, or 2.1 percent, to 1538.79.
Oil prices helped fuel the pessimism, tumbling 8 percent to a new low for the year as investors bet economic weakness would curb demand. Wall Street normally welcomes falling oil as a boost for consumers, but steep drops can touch off deeper fears about the overall economy.
Wall Street is expecting fourth-quarter and full-year earnings will be particularly bleak, especially after several companies warned last week that they are being hit hard by the recession. Aluminum producer Alcoa, which last week announced it would slash production, fell again Monday after an analyst lowered his rating on the stock. Alcoa said after the market closed that it lost $1.19 billion during its fourth quarter as demand for aluminum plunged.
Financial stocks also declined as investors looked to Citigroup and Morgan Stanley, which could announce a deal as soon as Wednesday to combine their brokerage operations. The potential tie-up underscores the troubles some banks are still having with tattered balance sheets. Comments from President-elect Barack Obama that he would consider using some of the remaining money from the government's $700 billion bailout fund added to investors' nervousness about the financial sector.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude fell $3.24 to settle at $37.59 a barrel on the New York Mercantile Exchange.
Chevron lost $2.00, to $70.82.
Citigroup fell $1.15 to $5.60.
Morgan Stanley dropped 27 cents to $18.79.