New York: Wall Street ushered in the Barack Obama presidency with a record Inauguration Day drop on Tuesday amid fresh signs the global bank crisis was far from over.
High expectations for details on how the new administration would address the growing banking crisis and faltering economy were dampened after the inauguration speech concluded with little new information to digest.
State Street Corp, the world’s largest institutional money manager, spooked investors about what is considered one of the safest areas in banking when it said it had a $6.3 billion unrealized loss in its investment portfolio and lowered its outlook. Its shares plunged 59% to $14.89.
“Stocks are getting crushed because of the never-ending tragedy that has fallen upon the banking sector,” said Tom Sowanick, chief investment officer of Clearbrook Financial LLC in Princeton, New Jersey.
The Dow Jones industrial average dropped 332.13 points, or 4.01%, to 7,949.09. The Standard & Poor’s 500 Index slid 44.90 points, or 5.28%, to 805.22. The Nasdaq Composite Index tumbled 88.47 points, or 5.78%, to 1,440.86.
The decline for the Dow marked the largest point and percentage drop for the index since 1 December, 2008, and the first time the Dow has been below 8,000 since Nov. 20, 2008.
Since Obama won the election in November, Wall Street has been betting he will put plans in place to help stabilize the sliding economy and stem rising unemployment.
The negative tone for the financial sector was set in Britain by the Royal Bank of Scotland, which unveiled that it expects to take the biggest loss in British corporate history on Monday, when US markets were closed for the Martin Luther King holiday.
The news sparked concerns about the global banking sector and hurt shares of financials, including JPMorgan Chase & Co, which was the Dow’s top drag.
Citigroup’s shares rose nearly 3% to $2.88 in extended trade after the company declared a quarterly dividend of 1 cent per share and said it had completed the sale of Citigroup Technology Services Ltd (India) for $127 million.
Bank of New York Mellon shed 2.6% to $18.50 in extended trade following its fourth-quarter earnings.
Although the S&P 500 has rebounded from its 21 November intraday low, the broad index has fallen 10.9% this year on worries about the deepening global recession.
Technology shares were pulled down by expectations of poor quarterly results from big-cap tech companies, including International Business Machines Corp.
Big-cap tech companies also got hurt by a rise in the dollar, which makes it difficult for overseas consumers to buy their products, said Robert Francello, head of equity trading for Apex Capital hedge fund in San Francisco.
IBM shed 3.5% to $81.98 on the New York Stock Exchange before quarterly results, which were expected after the bell.
Shares of Intel, the world’s largest chip maker, fell 6.4% to $12.86 on Nasdaq after the company cut the price of some processors by as much as 48%.
Declining stocks outnumbered advancing ones on the NYSE by almost nine to one, while on the Nasdaq, about six stocks fell for every one that rose.