U.S. Stocks Tumble on Concern Bailout Won't Stop Recession By Elizabeth Stanton
Sept. 22 (Bloomberg) -- U.S. stocks tumbled, led by banks, retailers and technology companies, as oil jumped 15 percent and investors speculated the Treasury's plan to buy toxic mortgage assets will fail to prevent a recession. The Standard & Poor's 500 Index lost 3.8 percent, erasing almost half of its rally over the previous two days. Sovereign Bancorp Inc., Marshall & Ilsley Corp. and Washington Mutual Inc. sank more than 21 percent, sending the S&P 500 Banks Index to a record plunge, on concern the government bailout will lower the value of mortgage loans they hold. Apple Inc. and Cisco Systems Inc. dragged down computer stocks on concern slower growth will reduce sales. The S&P 500 retreated 47.99 points to 1,207.09. The Dow Jones Industrial Average slid 372.75, or 3.3 percent, to 11,015.69. The Nasdaq Composite Index decreased 94.92, or 4.2 percent, to 2,178.98. Seven stocks retreated for each that rose on the New York Stock Exchange in floor volume of 1.3 billion shares, 45 percent below last week's average. ``They really haven't changed the economic fundamentals at all,'' said Jeffrey Coons, co-director of research at Manning & Napier Advisors Inc. in Fairport, New York, which manages $18 billion. ``We still have a debt-laden U.S. consumer facing falling employment.'' Treasury bonds and the dollar tumbled on concern the U.S. government is spending too much to save banks after the collapse of Lehman Brothers Holdings Inc., Fannie Mae, Freddie Mac and American International Group. Oil, heating oil and copper climbed more than 3 percent as the dollar's biggest slide in seven years against the euro heightened the risk of inflation. Regionals Pare Rally Regions Financial, Marshall & Ilsley and Huntington Bancshares led regional banks to the steepest drop in two months. The group retreated after rising more than 48 percent last week on speculation the companies avoided the worst of the subprime-mortgage crisis. JPMorgan Chase & Co. and Merrill advised clients to sell midsized lenders because they won't immediately benefit from the Treasury's mortgage bailout and may have to write down assets based on the prices received by their larger rivals. ``Our initial impression of the plan is that the benefits to the regional banks would be indirect, and as a result, we would lock in substantial profits generated over the past several weeks,'' wrote JPMorgan analysts led by Steven Alexopoulos. Regions Financial, M&I The S&P 500 Banks Index slumped 12 percent today, the most since the gauge was created in 1989, as all 20 of its companies declined at least 3.7 percent. Regions Financial retreated $4.20, or 21 percent, to $15.60. Marshall & Ilsley fell $6.66, or 23 percent, to $22.84. Huntington slid 23 percent to $9.81. Merrill analysts said funding bases for small and mid-cap banks ``may not be as secure as some believe'' as deposits leave for larger banks and borrowing costs become more expensive, Merrill analysts said. Regions Financial, Marshall & Ilsley and Huntington Bancshares were among the biggest gainers in the S&P 500 on Sept. 19, when the market rally forced sellers of some expiring equity options to buy shares, said Michael McCarty, chief options and equity strategist at Meridian Equity Partners Inc. in New York. ``You're reversing part of that artificial strength,'' McCarty said. To contact the reporter on this story: Elizabeth Stanton in New York at [EMAIL PROTECTED] --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
