Losses, Layoffs Pile Up, but Stocks Gain
Saturday, January 17, 2009
Stocks gained modest ground yesterday after the government announced new measures to shore up Bank of America, but they ended the week in the red.
The Dow Jones industrial average gained 0.8 percent, or 68.73 points, to close at 8281.22, while the Standard & Poor's 500-stock index was up 0.8 percent, or 6.38 points, to 850.12. The tech-heavy Nasdaq composite index gained 1.2 percent, or 17.49 points, to 1529.33.
But stocks were down for the week as investors endured more layoff announcements, poor economic data and the prospect that banking industry troubles are not over. The Dow and S&P fell 3.7 and 4.5 percent, respectively, this week. The Nasdaq was down 2.7 percent.
The financial sector took a big hit yesterday, led by Bank of America, which had the biggest losses on the Dow. The bank tumbled 14 percent to $7.18 a share after announcing it would receive another $20 billion in government help and its first quarterly loss since the 1990s.
Though investors cheered the bailout, analysts said, it was also seen as a dire sign that historic efforts last year to stabilize the sector were not enough. "The first time they had to bail out financial companies, no one thought they would have to come back and do it again," said Dan Faretta, a senior market strategist Lind-Waldock, a Chicago retail brokerage firm. "That leaves the door open to maybe we have not seen the worst yet."
Adding to those concerns, Citigroup reported an $8.29 billion loss in its fourth quarter and an $18.7 billion loss for the year. The New York bank said it would break itself into two businesses and sell some assets. Its stock fell almost 9 percent, to $3.50. That turbulence helped bring down other financial stocks, including J.P. Morgan Chase and Wells Fargo, which lost 6 percent and 7 percent, respectively.
The market was also weighed down by more layoff announcements. Chip maker Advanced Micro Devices was up 1 percent to $2.29 a share after announcing it would shed 1,100 positions, 9 percent of its staff. Bankrupt retailer Circuit City said it would liquidate its assets after failing to attract a buyer, putting 34,000 people out of work. Hertz rental car company announced it will eliminate more than 4,000 positions amid decreasing demand. Its stock closed down 2 percent to $5.27 a share.
In economic news, consumer prices fell for the third straight month, according to Labor Department data. They were down 0.7 percent in December, a smaller drop than was expected by analysts. For the year, prices grew slightly, by 0.1 percent, the slowest pace in more than 50 years.
Industrial production fell by 2 percent in December, according to data from the Federal Reserve. That was a bigger drop than expected. For the year, industrial production fell 7.8 percent.