All three major US stock indexes plunged more than two per cent on Tuesday after a record loss at Citigroup, and the worst showing for retailers in five years fueled fears that the economy was heading into a recession.
Citigroup, the largest US bank, slashed its dividend after writing down $18.1 billion for losses tied to sub-prime home loans and other risky debt, sending its shares down seven per cent. That added to concerns the global credit crisis is far from over.
The picture for stocks grew grimmer after the government said retail sales unexpectedly fell in December to close out the weakest year since 2002. Costlier energy and falling home prices depressed spending during the holiday shopping season, a key concern because consumer spending accounts for more than two-thirds of US economic activity.
Adding to the market's decline, shares of plane maker Boeing fell 4.7 per cent after The Wall Street Journal reported the company may delay its 787 program again.
Investors were also unimpressed by new offerings from Apple unveiled at the annual Macworld convention in San Francisco. Apple's shares slid 5.4 per cent.
"It's a perfect storm of negativity today," said Michael James, a senior trader at Wedbush Morgan in Los Angeles. He pointed to the combination of dismal results from Citigroup, the poor retail sales figures, Boeing news and the lack of a "wow" factor from Apple.
The Dow Jones industrial average fell 277.04 points, or 2.17 per cent, to close at 12,501.11, to its worst level since April. All 30 Dow components ended the day in the red.
The Standard & Poor's 500 Index ended down 35.30 points, or 2.49 per cent, at 1,380.95. The Nasdaq Composite Index dropped 60.71 points, or 2.45 per cent, to close at 2,417.59.
The torrent of bad news did not let up after the closing bell. Chipmaker Intel's shares plummeted 13.8 per cent to $19.55 in extended trade, after its revenue missed Wall Street estimates.
"Intel touches so many names and it's also global, so it should have an impact on the market to the down side," on Wednesday, said Bennett Gaeger, Managing Director at Stifel Nicolaus in Baltimore.
During the regular session, Citigroup shares slid 7.3 per cent to $26.94. In order to help shore up its balance sheet, Citigroup said it plans to raise $14.5bn from outside investors and cut 4,200 jobs.
Shares of Bank of America, the US’ second biggest bank, fell 3.4 per cent to $37.88. Shares of Merrill Lynch & Co, the world's largest brokerage, which also announced a plan on Tuesday to raise capital, were down 5.3 per cent at $53.01.
Apple Inc fell 5.4 per cent to $169.04, and was the biggest drag on the Nasdaq. Boeing shares ended down 4.7 per cent at $77.86, its worst closing percentage decline since June 2003 and were the top drag on the Dow.
The latest retailer with disappointing news was home goods store Williams-Sonoma, which cut its outlook on Tuesday after a weak holiday sales season. Williams-Sonoma shares slid 9.9 per cent at $20.01.
Retail sales figures are considered a key benchmark because consumer spending accounts for more than two-thirds of US economic activity.
Energy stocks also pushed down the market after US crude oil futures fell 2.2 per cent on fears a recession would dent demand. Oil field services company Schlumberger's shares lost 6.9 per cent to $88.93 and Valero Energy fell 8.3 per cent to $54.90. Exxon Mobil led both the S&P and the Dow lower, dropping two per cent to $89.02.
Trading was moderate on the New York Stock Exchange, with about 1.8 billion shares changing hands, below last year's estimated daily average of roughly 1.9 billion, while on Nasdaq, about 2.38 billion shares traded, ahead of last year's daily average of 2.17 billion.
Declining stocks were outnumbering advancing ones by a ratio of about three to one on the NYSE and on Nasdaq. (Reuters)
Wall Street plummets amid weak retail sales