Disappointment Over Bailout Drives Losses
U.S. stocks fell last week after Treasury Secretary Timothy F. Geithner failed to convince investors that his bank rescue will work.
Financial shares, led by SunTrust Banks and Huntington Bancshares, tumbled the most in the Standard & Poor's 500-stock index, losing 10 percent. The benchmark index suffered a 4.9 percent retreat on Tuesday, the day Geithner's plan was announced, amid speculation that the economy is weakening because loans remain scarce for businesses and consumers.
"People were hoping for quicker action," said Michael S. Strauss of Commonfund in Wilton, Conn. "The expectations with that plan were that we would see some nuts and bolts of how we're going to do it, what the price will be. They didn't see that silver bullet."
The S&P 500 fell 4.8 percent, the most for a week in three months, to 826.84. The measure has now declined 8.5 percent in 2009. The Dow Jones industrial average slumped 430.18 points, or 5.2 percent, to 7850.41.
The S&P 500 Financials Index retreated 10 percent for the week as Geithner said he's still "exploring a range of different structures" to bail out lenders. SunTrust Banks and Huntington each slumped 28 percent. Bank of America and Citigroup slipped more than 9 percent.
The Nasdaq composite index finished the week down 3.6 percent.
Geithner pledged up to $2 trillion in government financing for programs aimed at spurring new lending and addressing banks' toxic assets. The plan, which he said will "take time" to bear fruit, includes limits on bank dividends and acquisitions.
"Any incremental surprises on the financial side certainly are not welcome," said Walter B. Todd III, a portfolio manager at Greenwood Capital in Greenwood, S.C. "The situation with financials has to get resolved for us to have a sustainable move higher."
Principal Financial Group plunged 31 percent on concern that the life insurer needs more capital.
Alcoa slumped 11 percent as S&P cut the aluminum producer's credit rating to the lowest investment grade.
The yield on 10-year Treasury notes fell to 2.90 percent, from 2.99 percent a week earlier. The Treasury will auction $31 billion of three-month bills and $30 billion of six-month bills on Tuesday. They yielded 0.30 percent and 0.47 percent, respectively, in when-issued trading. One-month bills will be sold Wednesday.
-- Bloomberg News