U.S. Stocks Fall, S&P 500 Drops to 12-Year Low; Citigroup Sinks
2009-02-27 21:48:27.687 GMT
By Lynn Thomasson
Feb. 27 (Bloomberg) -- U.S. stocks slid, sending the
Standard & Poor’s 500 Index to a 12-year low, as the government
cut shareholders’ stake in Citigroup Inc. by 74 percent and the
economy shrank at a faster pace than previously estimated.
Citigroup plunged 39 percent after the Treasury agreed to
convert as much as $25 billion of preferred shares into common
stock in a third rescue attempt. Bank of America Corp. tumbled 26
percent, snapping a four-day rally in an S&P 500 group of banks.
Alcoa Inc. and Boeing Co. fell more than 3.8 percent after the
Commerce Department said gross domestic product contracted at a
6.2 percent annual pace in the fourth quarter.
“The Citi story is a nightmare that keeps getting worse,
with no end in sight,” said Matthew Kaufler, money manager at
Federated Clover Investment Advisors, which oversees $2.1
billion. “The fact that it’s occurring on a day when we’re
getting horrible GDP numbers adds some kerosene to the mix.”
The S&P 500 lost 2.4 percent to 735.09, its lowest close
since December 1996. The Dow Jones Industrial Average fell 119.15
points, or 1.7 percent, to 7,062.93, leaving it 50 percent below
its 2007 record and at its lowest level since May 1997. The
Russell 2000 Index slipped 1 percent.
The S&P 500 slid 4.5 percent over the past five days, its
third straight weekly decline, as companies from JPMorgan Chase &
Co. to Textron Inc. cut dividends to shore up capital and
President Barack Obama proposed reducing payments to health-care
companies. The index fell 11 percent in February amid concern
Obama’s stimulus package won’t stem the deepening recession.
Losses Limited
Losses were limited today as investors snapped up shares
after the S&P 500’s valuation slid to a 23-year low.
Citigroup sank 96 cents to $1.50, an 18-year low. The
Treasury Department said it will swap its preferred shares for
common stock only if private holders agree to the same terms. The
U.S. doesn’t immediately intend to inject additional money after
channeling $45 billion to the New York-based company last year.
More than 1.8 billion shares of Citigroup changed hands
today, setting a record for trading volume for a U.S. stock,
according to the New York Stock Exchange. Citigroup accounted for
about 13 percent of total trading volume of 14 billion shares,
which was 46 percent more than the three-month daily average of
stocks traded on all U.S. exchanges.
Bank of America, which also got $45 billion from the
government, dropped $1.37 to $3.95. Wells Fargo & Co., recipient
of $25 billion in U.S. funds, slumped 16 percent to $12.10. The
companies are among more than 400 financial institutions that
received cash in exchange for preferred shares from the
government.
‘It’s Dilution’
“The fear is that this will happen to all the preferreds
that the government has given to the banks,” said Tom Wirth,
senior investment officer at Chemung Canal Trust Co., which
manages $1.5 billion in Elmira, New York. “In one word, it’s
dilution.”
The U.S. government has pledged more than $11.6 trillion in
the past 19 months on behalf of American taxpayers to bail out
banks and stimulate economic growth, according to data compiled
by Bloomberg as of Feb. 24.
It hasn’t been enough to stop banks from collapsing.
Regulators seized 14 lenders this year, including eight this
month. Last year, regulators shuttered 25 banks, including
Washington Mutual Inc., the biggest bank failure in U.S. history.
The 10 percent decline in the S&P 500 Banks Index today
halted a four-day advance, 30 percent advance in the measure that
was spurred by decreased concern that banks would be nationalized
and a request for additional bailout funds for the industry in
Obama’s first budget proposal.
Weighting Dwindles
Financial companies may fall to 7 percent of the S&P 500
before losses in bank stocks end, extending a drop that already
cut the weighting in half, say analysts including Mary Ann
Bartels of Bank of America and John Roque of Natixis Bleichroeder
Inc., who base predictions on price charts.
Citigroup, which had a market value of $277 billion at the
end of 2006, has tumbled 97 percent since then, leaving it valued
at $8.2 billion.
General Electric Co. retreated 6.5 percent to $8.51. The
company, whose finance unit has been battered by rising loan
losses, cut its annual dividend for the first time since at least
1940 as Chief Executive Officer Jeffrey Immelt moves to preserve
cash and protect the company’s top AAA credit rating. The
quarterly payout was lowered to 10 cents a share from 31 cents.
MetLife Tumbles
MetLife Inc. fell the most since October, tumbling 23
percent to $18.46. S&P downgraded the biggest U.S. life insurer
and nine other companies in the industry on the prospect of
further investment losses. A measure of insurers in the U.S.
stock benchmark sank 7.9 percent.
Crude oil fell for the first time in four days, pushing
shares of Exxon Mobil Corp. to a 4.3 percent drop to $67.90.
The S&P 500 traded today for as little as 12.8 times company
profits from the past 10 years. That was the cheapest valuation
since February 1986, according to data compiled by Yale
University professor Robert Shiller. He uses a decade of earnings
to smooth out short-term fluctuations.
“We’re still in a falling market, but we can begin to
envision an end to that fall because the prices are now down to
levels that are reasonable,” said Gordon Fowler, chief
investment officer at Glenmede Trust Co., which oversees about
$16.3 billion in Philadelphia.
Dell, Blackstone Rally
Dell Inc. had the biggest gain in almost a month, climbing
3.9 percent to $8.53. The second-largest maker of personal
computers reported fourth-quarter profit that topped analysts’
estimates and said it will save an additional $1 billion a year
by 2011.
Blackstone Group LP rallied 26 percent to $4.87 for the
steepest advance since November. Chairman Stephen Schwarzman
reassured investors during a conference call that Blackstone, the
world’s biggest private-equity firm, has the ability to protect
its existing holdings and invest in new deals.
Tyson Foods Inc., the second-largest U.S. chicken producer,
gained 5.2 percent to $8.43. Chicken-breast and whole bird prices
will gain in 2009 on increased demand for lower-priced meats,
boosting earnings at poultry-processing companies, said Kevin
Bost, president of Procurement Strategies Inc. in Des Plaines,
Illinois.
Profits have slumped 38 percent on average at the 475
companies in the S&P 500 that have reported quarterly earnings,
according to Bloomberg data.
For Related News and Information:
Stories on U.S. stocks: NI USS <GO>
Market map of the S&P 500: SPX <Index> IMAP <GO>
Global market map: MMAP <GO>
Most-active stocks: MOST <GO>
Feature stories on stocks: TNI GREET STK <GO>
Stories on U.S. stock options: NI USO <GO>
--With reporting by Edgar Ortega and Elizabeth Stanton in New
York. Editors: Michael Regan, Nick Baker
To contact the reporter on this story:
Lynn Thomasson in New York at +1-212-617-5346 or
[email protected].
To contact the editor responsible for this story:
Nick Baker at +1-212-617-5919 or [email protected].<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o:p></o:p>
2009-02-27 21:48:27.687 GMT
By Lynn Thomasson
Feb. 27 (Bloomberg) -- U.S. stocks slid, sending the
Standard & Poor’s 500 Index to a 12-year low, as the government
cut shareholders’ stake in Citigroup Inc. by 74 percent and the
economy shrank at a faster pace than previously estimated.
Citigroup plunged 39 percent after the Treasury agreed to
convert as much as $25 billion of preferred shares into common
stock in a third rescue attempt. Bank of America Corp. tumbled 26
percent, snapping a four-day rally in an S&P 500 group of banks.
Alcoa Inc. and Boeing Co. fell more than 3.8 percent after the
Commerce Department said gross domestic product contracted at a
6.2 percent annual pace in the fourth quarter.
“The Citi story is a nightmare that keeps getting worse,
with no end in sight,” said Matthew Kaufler, money manager at
Federated Clover Investment Advisors, which oversees $2.1
billion. “The fact that it’s occurring on a day when we’re
getting horrible GDP numbers adds some kerosene to the mix.”
The S&P 500 lost 2.4 percent to 735.09, its lowest close
since December 1996. The Dow Jones Industrial Average fell 119.15
points, or 1.7 percent, to 7,062.93, leaving it 50 percent below
its 2007 record and at its lowest level since May 1997. The
Russell 2000 Index slipped 1 percent.
The S&P 500 slid 4.5 percent over the past five days, its
third straight weekly decline, as companies from JPMorgan Chase &
Co. to Textron Inc. cut dividends to shore up capital and
President Barack Obama proposed reducing payments to health-care
companies. The index fell 11 percent in February amid concern
Obama’s stimulus package won’t stem the deepening recession.
Losses Limited
Losses were limited today as investors snapped up shares
after the S&P 500’s valuation slid to a 23-year low.
Citigroup sank 96 cents to $1.50, an 18-year low. The
Treasury Department said it will swap its preferred shares for
common stock only if private holders agree to the same terms. The
U.S. doesn’t immediately intend to inject additional money after
channeling $45 billion to the New York-based company last year.
More than 1.8 billion shares of Citigroup changed hands
today, setting a record for trading volume for a U.S. stock,
according to the New York Stock Exchange. Citigroup accounted for
about 13 percent of total trading volume of 14 billion shares,
which was 46 percent more than the three-month daily average of
stocks traded on all U.S. exchanges.
Bank of America, which also got $45 billion from the
government, dropped $1.37 to $3.95. Wells Fargo & Co., recipient
of $25 billion in U.S. funds, slumped 16 percent to $12.10. The
companies are among more than 400 financial institutions that
received cash in exchange for preferred shares from the
government.
‘It’s Dilution’
“The fear is that this will happen to all the preferreds
that the government has given to the banks,” said Tom Wirth,
senior investment officer at Chemung Canal Trust Co., which
manages $1.5 billion in Elmira, New York. “In one word, it’s
dilution.”
The U.S. government has pledged more than $11.6 trillion in
the past 19 months on behalf of American taxpayers to bail out
banks and stimulate economic growth, according to data compiled
by Bloomberg as of Feb. 24.
It hasn’t been enough to stop banks from collapsing.
Regulators seized 14 lenders this year, including eight this
month. Last year, regulators shuttered 25 banks, including
Washington Mutual Inc., the biggest bank failure in U.S. history.
The 10 percent decline in the S&P 500 Banks Index today
halted a four-day advance, 30 percent advance in the measure that
was spurred by decreased concern that banks would be nationalized
and a request for additional bailout funds for the industry in
Obama’s first budget proposal.
Weighting Dwindles
Financial companies may fall to 7 percent of the S&P 500
before losses in bank stocks end, extending a drop that already
cut the weighting in half, say analysts including Mary Ann
Bartels of Bank of America and John Roque of Natixis Bleichroeder
Inc., who base predictions on price charts.
Citigroup, which had a market value of $277 billion at the
end of 2006, has tumbled 97 percent since then, leaving it valued
at $8.2 billion.
General Electric Co. retreated 6.5 percent to $8.51. The
company, whose finance unit has been battered by rising loan
losses, cut its annual dividend for the first time since at least
1940 as Chief Executive Officer Jeffrey Immelt moves to preserve
cash and protect the company’s top AAA credit rating. The
quarterly payout was lowered to 10 cents a share from 31 cents.
MetLife Tumbles
MetLife Inc. fell the most since October, tumbling 23
percent to $18.46. S&P downgraded the biggest U.S. life insurer
and nine other companies in the industry on the prospect of
further investment losses. A measure of insurers in the U.S.
stock benchmark sank 7.9 percent.
Crude oil fell for the first time in four days, pushing
shares of Exxon Mobil Corp. to a 4.3 percent drop to $67.90.
The S&P 500 traded today for as little as 12.8 times company
profits from the past 10 years. That was the cheapest valuation
since February 1986, according to data compiled by Yale
University professor Robert Shiller. He uses a decade of earnings
to smooth out short-term fluctuations.
“We’re still in a falling market, but we can begin to
envision an end to that fall because the prices are now down to
levels that are reasonable,” said Gordon Fowler, chief
investment officer at Glenmede Trust Co., which oversees about
$16.3 billion in Philadelphia.
Dell, Blackstone Rally
Dell Inc. had the biggest gain in almost a month, climbing
3.9 percent to $8.53. The second-largest maker of personal
computers reported fourth-quarter profit that topped analysts’
estimates and said it will save an additional $1 billion a year
by 2011.
Blackstone Group LP rallied 26 percent to $4.87 for the
steepest advance since November. Chairman Stephen Schwarzman
reassured investors during a conference call that Blackstone, the
world’s biggest private-equity firm, has the ability to protect
its existing holdings and invest in new deals.
Tyson Foods Inc., the second-largest U.S. chicken producer,
gained 5.2 percent to $8.43. Chicken-breast and whole bird prices
will gain in 2009 on increased demand for lower-priced meats,
boosting earnings at poultry-processing companies, said Kevin
Bost, president of Procurement Strategies Inc. in Des Plaines,
Illinois.
Profits have slumped 38 percent on average at the 475
companies in the S&P 500 that have reported quarterly earnings,
according to Bloomberg data.
For Related News and Information:
Stories on U.S. stocks: NI USS <GO>
Market map of the S&P 500: SPX <Index> IMAP <GO>
Global market map: MMAP <GO>
Most-active stocks: MOST <GO>
Feature stories on stocks: TNI GREET STK <GO>
Stories on U.S. stock options: NI USO <GO>
--With reporting by Edgar Ortega and Elizabeth Stanton in New
York. Editors: Michael Regan, Nick Baker
To contact the reporter on this story:
Lynn Thomasson in New York at +1-212-617-5346 or
[email protected].
To contact the editor responsible for this story:
Nick Baker at +1-212-617-5919 or [email protected].<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o:p></o:p>
