American Express robs Wall St of 5th day of gains

American Express robs Wall St of 5th day of gains
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First Published: Tue, Mar 17 2009. 08 24 AM IST
Updated: Tue, Mar 17 2009. 08 24 AM IST
New York: US stocks fell on Monday after American Express Co said the number of people struggling to make credit card payments grew, erasing earlier optimism that banks could return to profit in the downturn.
It was Wall Street’s first decline after a four-day winning streak. The Nasdaq fell nearly 2% as investors booked profits in semiconductor stocks following a strong week. An index of semiconductor shares fell 3.6 percent, following a 13% gain last week.
American Express, which caters to wealthier consumers that are viewed as more credit worthy, said its credit card default rates rose to 8.7% in February. Shares of American Express lost 3.3% to $12.66.
“American Express took the legs out from under us,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. “When they came out that the default rates were higher in the last quarter, that accelerated the selling,” he added.
Intel also put pressure on the Nasdaq after the company accused Advanced Micro Devices of breaching the terms of a cross-licensing agreement between the rival chip makers.
The Dow Jones industrial average shed 7.01 points, or 0.10%, to 7,216.97. The Standard & Poor’s 500 Index declined 2.66 points, or 0.35% to 753.89. The Nasdaq Composite Index lost 27.48 points, or 1.92%, to 1,404.02.
The declines put the brakes on last week’s four-day rally. Even after the recent advance, the S&P 500 is down 16.5 percent in 2009 and off more than 50 percent from highs reached in October 2007.
Shares of Alcoa Inc slid 10.1% to $5.50 in extended trading after the company said after the bell that it will cut its dividend, issue stock and convertible notes and trim its 2010 spending in an effort to weather a downturn in demand for aluminum.
Banks had earlier pushed indexes higher after British bank Barclays Plc said it had a “strong start” to 2009. The bank also confirmed it had discussed selling its iShares unit, in a move that could help it avoid giving a stake to the British government.
The comments echoed those made last week by Bank of America Corp, JPMorgan Chase & Co and Citigroup Inc. Citi shares jumped 31% to $2.33, off a session high of $2.68. Earlier, Citi’s stock had shot up as much as 50.6%.
The S&P financial index reversed earlier gains to end down 1.9 percent.
Banking questions still remain
Analysts also noted that despite the positive comments from banks, questions over what measures the US government will take to shore up the financial system still weigh on investors.
“While we’ve had a significant rally, I think there’s still too many questions that need to be answered for people to feel comfortable piling into the market even here,” said Michael James, senior trader at regional investment bank Wedbush Morgan, in Los Angeles.
Among Nasdaq stocks, shares of Intel fell 3.1% to $14.25.
AMD, which denied Intel’s charge that it had breached a cross-licensing agreement, dropped 1.6% to $2.48 on the New York Stock Exchange.
Comments from Federal Reserve chairman Ben Bernanke helped improve investor sentiment after he said during an interview on the CBS program “60 Minutes” on Sunday that the US recession could probably come to an end this year and “we’ll see recovery beginning next year.”
Financial stocks were also helped by news that the Financial Accounting Standards Board, which sets US accounting rules, proposed to allow more leeway on mark-to-market accounting rules.
Mark-to-market accounting has forced financial institutions to write down billions of dollars in assets.
In economic news, a report showed that a gauge of New York State manufacturing activity hit a record low in March.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 3 to 2. On the Nasdaq, declining stocks prevailed, with about five stocks falling for every four that rose.
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First Published: Tue, Mar 17 2009. 08 24 AM IST
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