Stocks on Wall Street took a sharp plunge on Thursday after a discouraging report on the prospects of the nation’s biggest brokerage firms. The Dow Jones industrial average fell more than 250 points to its lowest level of the year.
A report from Goldman Sachs predicted a new round of write-downs at Citigroup and Merrill Lynch, and downgraded Citi to a strong “sell” rating.
Shares of Citi slipped 6 percent; Merrill Lynch shares were down 5.3 percent.
The sell-off in brokerage firms helped push the Dow down 2.2 percent, past its intraday low for the year. The blue-chip index is now lower than it was at the height of the Bear Stearns debacle.
A downgrade of General Motors also put pressure on stocks. Shares of G.M. were off by 11 percent in midday trading. Shares of Ford were down 4.5 percent
The broader Standard & Poor’s 500-stock index slipped 2.2 percent, or 29 points, and the technology-heavy Nasdaq composite index was off 2.6 percent.
Many investors had hoped that the investment banks had suffered the worst of the credit squeeze. But Goldman’s report, released Thursday morning, downgraded the entire brokerage sector to “neutral,” a sign of decreasing confidence that set of investors’ already-frayed nerves.
Some had hoped that shares of financial services firms would begin to recover after nearly a year of painful sell-offs.
Instead, shares fell again, with Bank of America, JPMorgan Chase and Lehman Brothers all trading lower.
It also became more expensive to guard against the risk of default on bonds from investment banks. Spreads on credit default swaps widened for most of the major brokerage firms, an indication decreased confidence in the financial stability of Wall Street’s marquee names.
Goldman itself suffered a downgrade at the hands of Wachovia, which said the bank faced a poor outlook over the summer.
Shares of G.M. declined after an analyst at Goldman Sachs cut the company’s rating, and wrote that the car market could get even worse.
Also adding pressure to the markets was the price of crude oil. In New York, oil was trading up about $3.50, to $138.11 a barrel. The euro gained against the dollar. Yields fell on the major Treasury notes, a sign that investors are moving to the relative safety of government bonds.
No comments:
Post a Comment