Worries about Dubai wipe out early gains
U.S. stocks were flat last week as speculation that Dubai will default on its debt unnerved investors, overshadowing an improvement in American jobless claims and home sales and negating gains early in the week.
Morgan Stanley lost 5 percent, Bank of America fell 3.9 percent and Goldman Sachs Group dropped 3.4 percent. Financial institutions had the biggest drop among 10 industries in the Standard & Poor's 500-stock index as Dubai World, the state-controlled company with $59 billion of liabilities, said it is seeking to delay debt payments.
Among S&P 500 companies, 273 declined and 224 rose for the week. The S&P 500-stock index added less than 0.1 percent, finishing the week at 1091.49 after climbing to a 13-month high on Nov. 25. The Dow Jones industrial average fell 8.24 points, or 0.1 percent, to 10,309.92. The Nasdaq composite index declined 0.4 percent, to 2138.44.
"Investors are selling into a vacuum," said Jeffrey D. Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Fla. "The collateral damage that will take place from the Dubai fallout is unknown. You're not going to know until the pros get back next week."
The S&P 500 index fell as much as 2.4 percent on Nov. 27. Dubai may owe more than the $80 billion to $90 billion in liabilities assumed by investors, UBS analysts said. The emirate, which borrowed $80 billion in a four-year construction boom to transform its economy into a regional tourism and financial hub, suffered the world's steepest property slump in the worst global recession since World War II.
The U.S. Treasury will auction $30 billion of three-month bills and $31 billion of six-month bills on Monday. One-month bills will be sold the next day.
-- Bloomberg News