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Wall Street drops on Madoff fallout

Wall Street drops on Madoff fallout
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First Published: Tue, Dec 16 2008. 08 40 AM IST
Updated: Tue, Dec 16 2008. 08 40 AM IST
New York: US stocks stumbled on Monday, roiled by worries about how big a bite the global financial crisis has taken from banks’ profits and fallout from a massive investment fraud scheme.
JPMorgan Chase & Co was the biggest drag on the Dow after Merrill Lynch cut the stock to an “underperform” rating and forecast a loss for the bank’s fourth quarter.
Another blow to sentiment was concern about the financial sector’s exposure to potential losses related to investment manager Bernard Madoff, who is accused by US authorities of masterminding a $50 billion fraud.
“There will be some investors as a result of this who say, ‘I’m going to put all my money in cash,´” said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.
The Dow Jones industrial average shed 65.15 points, or 0.75%, to end at 8,564.53. The Standard & Poor’s 500 Index fell 11.16 points, or 1.27%, to 868.57. The Nasdaq Composite Index dropped 32.38 points, or 2.10%, to 1,508.34.
The Dow is down 35% year to date and nearly 40% from its record closing high on Oct 9, 2007.
The downgrade of JPMorgan comes before earnings this week from two other big financial names, Goldman Sachs on Tuesday and Morgan Stanley on Wednesday. Analysts expect Goldman Sachs to report its first quarterly loss since going public in 1999. The S&P financial index fell 4 percent, with JPMorgan’s stock down 7.5% at $28.63.
Technology shares also pulled the market lower after Goldman Sachs cut its rating on Apple to “neutral” and removed the iPod maker from its conviction buy list, citing falling consumer demand for its products.
Apple’s stock slid 3.6% to $94.75 on Nasdaq.
Economic data gave investors more reasons for caution. A gauge of manufacturing in New York State hit a record low in December, while homebuilder sentiment remained at record lows for the month.
Investors looked ahead to an interest-rate decision from the Federal Reserve on Tuesday. The US central bank is expected to cut its benchmark fed funds rate to 0.5% from 1 percent in hopes of boosting the weak US economy.
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First Published: Tue, Dec 16 2008. 08 40 AM IST
More Topics: Markets | US | Stocks | Wall Street | Madoff Scam |