AFTER-TANKS-GIVING SALE HITS WALL STREET
Stocks tumbled yesterday amid growing gloom over costly bailout struggles by the two biggest banks on each side of the Atlantic – Citigroup here and HSBC in London.
Citigroup led Wall Street’s stock rout, falling nearly 6 percent to drop below the embarrassing $30-mark for the first time in five years, settling at $29.80.
In response to speculation that thousands of job cuts are in the works, Citi said it is planning to cut costs but that “any reports on specific numbers are not factual.”
Shares also skidded in Europe after HSBC, Europe’s biggest bank, said it will cover about $45 billion of shaky junk-mortgage paper to prevent a fire sale of the assets, and restore credit faith in Europe.
The credit crisis has wiped out as much as 10 percent from this year’s record high in stocks. The Dow Jones industrial average dropped 237.44, or 1.83 percent, to 12,743.44 after earlier this year breaking a milestone 14,000-mark.
The Standard & Poor’s 500 index plummeted 33.48, or 2.32 percent, to 1,407.22 and the Nasdaq fell 55.61, or 2.14 percent, to 2,540.99.
Citigroup and two other major US banks – Bank of America and JPMorgan Chase – are trying to pull together their own $80 billion rescue plan to contain its tainted junk mortgage paper – and also are asking smaller banks to help.
Analysts say the trio of giant banks could cause deep damage to credit markets because they face write-downs of as much as $400 billion from the junk paper, which they don’t even carry on their books. Bank of America shares skidded nearly 3 percent to $41.88.
Oil slipped 48 cents at $97.70 a barrel after trading as high as $99.11 earlier in the day. OPEC said it might raise production to slow the march of crude to the $100 mark. Crude is up 40 percent in the past four months.