Stocks plunged again Friday amid renewed fears that the financial sector's troubles with bad credit won't soon end and that some consumers are buckling under the effects of a US slowing economy. The Dow Jones industrials finished down nearly 250 points.
The arrival of earnings season has investors worried about how banks and brokerages have fared after suffering losses in the collapse of the subprime mortgage market. Traders appeared to grow more pessimistic ahead of reports next week from the nation's biggest financial institutions. Merrill Lynch & Co., Citigroup Inc. and JPMorgan Chase & Co. are all slated to weigh in next week.
Adding to investors' unease, Merrill Lynch might take a $15 billion hit from its exposure to soured subprime mortgage investments, according to The New York Times. The US's largest brokerage is also said to be seeking another capital infusion to help shore up its balance sheet.
Investors also grew nervous after American Express Corp. warned late Thursday that slower spending and more delinquencies on credit card payments will hamper profit throughout 2008. A profit warning from Tiffany & Co. added to Wall Street's unease about the fortitude of the consumer.
Friday's session revealed the extent of investors' misgivings about the financial sector's efforts to sew up its troubles. Bank of America Corp. agreed Friday to buy Countrywide Financial Corp. for $4b., a deal that rescues the country's largest mortgage lender but pays less than the company's market value.
The Dow fell 246.79, or 1.92 percent, to 12,606.30. The Dow had been down more than 300 points in the last hour.
Broader stock indicators also declined. The Standard & Poor's 500 index fell 19.31, or 1.36%, to 1,401.02, and the Nasdaq composite index fell 48.58, or 1.95%, to 2,439.94.
American Express fell $4.92, or 10.1%, to $44 and was by far the biggest decliner among the 30 stocks that comprise the Dow industrials. McDonald's Corp., also part of the Dow, fell $3.85, or 6.6%, to $54.32 after a Friedman Billings Ramsay analyst expressed doubt about the company's future earnings.
The Dow Jones industrial average ended the week down 193.88, or 1.51%, at 12,606.30. The Standard & Poor's 500 index finished down 10.60, or 0.75%, at 1,401.02. The Nasdaq composite index ended down 64.71, or 2.58%, at 2,439.94.
The London Stock Exchange's FTSE 100 share index closed down 20.7 points, or 0.33% at 6,202.00.
Japan's benchmark index fell to its lowest in more than two years. The Nikkei 225 index fell 277.32 points, or 1.93%, to 14,110.79 points, its lowest close since November 15, 2005.
In Hong Kong, the blue-chip Hang Seng Index fell 363.85 points, or 1.34%, to 26,867.01.
The dollar rose slightly against the euro and pound on Friday, benefiting from nervous currency investors withdrawing from risky "carry trades."
Carry trades involve borrowing currencies from countries with low interest rates, such as Japan and Switzerland, and investing the funds in higher-yielding assets elsewhere. Carry-trade beneficiaries are usually the euro and currencies of countries with high interest rates, such as the New Zealand kiwi.
The 15-nation euro was worth $1.4785 in late New York trading, a little below the $1.4793 it was worth Thursday after Federal Reserve Chairman Ben Bernanke said the US central bank would act aggressively in confronting economic woes - signaling more interest rate cuts - and the European Central Bank sounded a hawkish note on interest rates. Those announcements drove the dollar lower.
The pound dropped to $1.9573, down from $1.9609. On Thursday, the Bank of England kept its own rate unchanged, but signaled a cut was likely in February.
The dollar was down to 108.91 Japanese yen from 109.54 yen, and rose to 1.0206 Canadian dollars, up from 1.0108 Canadian dollars.
Gold briefly touched an all-time high above $900 an ounce Friday, boosting other commodities as investors shifted funds into hard assets amid fears the US may tilt into a recession.
An ounce of gold for February delivery on the New York Mercantile Exchange climbed $6.50 to fetch $900.10 in morning trading - the highest ever. The contract later pulled back on profit-taking to settle $4.10 higher at $897.70, a new all-time closing high.
Light, sweet crude for February delivery fell $1.02 to settle at $92.69 a barrel on the Nymex. February heating oil futures fell 2.14 cents to settle at $2.5359 a gallon on the Nymex while February gasoline fell 3.98 cents to settle at $2.3203 a gallon.
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