US stocks dive on bank nationalisation fears - Emirates24|7

US stocks dive on bank nationalisation fears

Stocks were down on Friday as investors became concerned about speculations of bank nationalisation in the US. (AFP) 

US stocks plunged deeper into six-year lows on Friday on rumours of bank nationalisation which President Barack Obama's administration moved to quash.

The Dow Jones Industrial Average fell 100.28 points (1.34 per cent) to 7,365.67 after a sharp sell-off on Thursday.

The tech-dominated Nasdaq dropped 1.59 points (0.11 per cent) to 1,441.23 and the broad-market Standard & Poor's 500 index shed 8.89 points (1.14 per cent) to 770.05.

The stock market was down more than three percent before rallying in late trading as fears for the banking system eased.

Since the opening bell, traders were concerned about the plight of the banks saddled with losses stemming from a home mortgage crisis that has triggered global turmoil.

"The pain continued on Wall Street today. Financial stocks were hurt by persistent fears that banks might be nationalized and dividends cut," said Wachovia Securities chief market strategist Al Goldman.

"Today's session was highly volatile, reflecting fear about the future of the financial system," experts at Charles Schwab & Co wrote.

Stocks recovered slightly after the White House moved to calm market fears, saying banks should remain under private control.

"This administration continues to strongly believe that a privately held banking system is the correct way to go," White House spokesman Robert Gibbs told reporters.

After the market closed for the week, the US Treasury also rejected the nationalization speculations.

"There are a lot of rumors in the market, as always, but you should not regard these as any indication of the policy of this administration," said a Treasury spokesman.

"As (Treasury) Secretary (Timothy) Geithner has said, we will preserve a financial system that is owned and managed by the private sector," he said.

Weighing on investor sentiment "is the angst over the specter of mega banks Citigroup and Bank of America possibly being nationalized in the foreseeable future," said Patrick O'Hare, Briefing.com.

"Whether that actually happens remains to be seen, but their stocks are acting as if it is a distinct possibility," he said.

Citigroup was down 22.31 per cent to $1.95 and Bank of America fell by 3.56 per cent to $3.79.

JPMorgan Chase lost 3.40 per cent to $19.90 and Wells Fargo down 9.16 per cent to $10.91.

General Electric, which recently reported lower profit, fell 6.76 per cent to $9.38.

Bonds rose. The yield on the 10-year US Treasury bond fell to 2.772 per cent from 2.857 per cent on Thursday while that on the 30-year bond dropped to 3.565 per cent from 3.688 per cent. Bond yields and prices move in opposite directions.

 

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