Stocks Resume Decline After Obama Pause
Stocks paused briefly as Barack Obama was sworn in as the 44th president but resumed their slide as banks took a beating over profit worries.
Expectations for the Obama administration are running high in the face of the deepening recession, questions over the use of TARP funds, the bailout of the Big Three auto makers and more.
"He still has huge issues to deal with," Manus Cranny, head of binaries at MF Global, told CNBC. Cranny didn’t rule out an "Obama bounce," though the odds are stacked against it: The Dow Jones Industrial Average has fallen 72 percent of the time on past inauguration days.
Bank stocks, last week's worst performers, continued to get poundedamid a fresh wave of bad news from the sector, both in the U.S. and abroad.
Big banks dragged down the Dow, with Bank of America, Citigroup and JPMorgan all down more than 10 percent.
Bank of America may slash as many as 4,000 jobs in its capital-markets unit, the Financial Times reported, after posting its first quarterly loss in 17 years last week. Citigroup had posted its fifth straight quarterly loss.
State Street plunged 50 percent after the Boston-based bank reported rising unrealized losses in its commercial-paper program and investment portfolio along with lower fourth-quarter profit. State Street, the world's biggest institutional asset manager, said Tuesday net income shrunk to $65 million, or 15 cents per share, compared with $223 million, or 57 cents per share, a year earlier. Analysts had expected 58 cents a share.
And overseas, the Bank of Scotland posted the biggest loss in UK corporate history, while the U.K. delivered a second round of stimulus to its banking sector.
Johnson & Johnson shares fell after the Dow component narrowly beat Wall Street expectations but said revenues would be flat in 2009.
The diversified health-care company earned $2.71 billion, or 97 cents per share, compared with $2.37 billion, or 82 cents per share, a year earlier. Excluding special items, J&J earned 94 cents per share, against analyst expectations of 92 cents per share.
Merck, AT&T and Verizon were among the few winners on the Dow.
Shares of New York Times slipped even as the struggling newspaper publisher got a boost from news that one of the world's richest men, Mexican billionaire Carlos Slim, will invest $250 million in the company, becoming one of its largest shareholders.
Consolidation continued in the auto sector as Italian auto maker Fiat agreed to take a 35 percent stake in privately-held Chrysler. Instead of paying cash, Fiat will cover the costs of retooling one or more Chrysler plants in the U.S. to make Fiat cars.
And American International Group’s chief investment officer will step down, according to the Wall Street Journal. Win Neuger will move to a different role within the insurance giant, the report said.
TUESDAY: Obama inauguration day; Earnings from J&J, IBM, CSX
WEDNESDAY: Weekly mortgage applications; Earnings from United Tech, Abbott Labs, Northern Trust, US Bancorp; Burlington Northern
THURSDAY: Housing starts; jobless claims; crude inventories; Earnings from Nokia, Fifth Third Bancorp; KeyCorp; Southwest Air; SunTrust Banks; United Health, Union Pacific, Microsoft, AMD, Capital One
FRIDAY: Natural-gas inventories; Earnings from GE, Harley-Davidson and Xerox
ALL WEEK: Detroit Auto Show (Jan. 11-25)
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