U.S. stocks closed broadly lower Friday as selling fueled by worries about the financial sector offset buying tied to short covering and bargain hunting, and trades based on the expiry of futures and options.
Bank of America (BAC) and Citigroup (C) managed to bounce off their worst levels after the White House tried to douse talk that the government would nationalize ailing banks. These stocks plunged earlier after Senate Banking Committee Chairman Dodd said it might be necessary to take control of some banks.
On Friday, the 30-stock Dow Jones industrial average finished lower by 100.28 points, or 1.34%, at 7,365.67. The broad S&P 500 index fell 8.89 points, or 1.14%, to 770.05. The tech-heavy Nasdaq composite index shed 1.59 points, or 0.11%, to 1,441.23.
The declines followed Thursday's skid in the Dow Jones industrial average through its Nov. 20 bear market low to a six-year low. The Dow is off 48% in the 16-month slide.
Treasuries soared on Friday. Gold futures rose as the dollar index retreated, piercing the $1,000 per ounce mark during the session. Crude oil futures eased.
"Taking a look at the three major indices from a chart standpoint, the DJIA is clearly the weakest with the NASDAQ holding up the best, and the S&P 500 somewhere in between," says S&P chief technical strategist Mark Arbeter. "The DJIA was the first of the three indices to break below its November bear market bottom at 7,552, and is now approaching the 2002 bear market low at 7,286."
Shares of Bank of America (BAC) and Citigroup (C) recovered somewhat after trading sharply lower for most of Friday's session on continued worries that the banks will be nationalized.
Banking executives and the Obama administration tried to quash nationalization talk. The Wall Street Journal Online reported that amid fears Citigroup and Bank of America could be on the verge of being nationalized, the White House gave assurances that it prefers banks to remain out of the government's hands. "This administration continues to strongly believe that a privately held banking system is the correct way to go, ensuring that they are regulated sufficiently by this government," White House spokesman Robert Gibbs said. "That's been our belief for quite some time, and we continue to have that."
Senate Banking Committee Chairman Christopher Dodd said the Obama administration is seeking to avoid nationalizing banks, and said that he doesn't want the government to take that step. Dodd said on Bloomberg Television's "Political Capital with Al Hunt" that President Barack Obama and Treasury Secretary Timothy Geithner are "working hard" on programs to help rescue the financial-services industry. Earlier, he said it may be necessary to nationalize some banks for a short time. Bank of America President Ken Lewis said BofA was nowhere near nationalization and that Dodd didn't understand the nature of nationalization, according to Fox Business News.
Meanwhile, the Wall Street Journal reported Lewis was subpoenaed last week by New York Attorney General Andrew Cuomo, who is investigating whether the bank violated state law by withholding information from investors.
Former Fed Chairman Paul Volcker told a Columbia University audience the U.S. economy is "in the middle of a kind of massive economic crisis". Said Volcker: "We're going to hear the reverberations about this for a long time." Volcker, the head of President Obama's Economic Recovery Advisory Board, characterized the downturn that started in December 2007 as "not like a typical recession in the U.S. or elsewhere." He also cautioned that U.S. government and central bank efforts to revive credit markets should only be temporary to alleviate the risk of inflation.
Shares of UBS AG (UBS) were lower following news that the company is being sued by the U.S. government in an effort to force disclosure of the identities of as many as 52,000 U.S. customers who allegedly hid their secret Swiss accounts from U.S. tax authorities.
The troubled newspaper industry remained in the headlines. The New York Times Co. (NYT) said its board voted to suspend the quarterly dividend on the company's Class A and Class B common stock. In November, 2008, the company reduced the payout level of its fourth quarter to $0.06 per share from $0.23 per share in the 2008 third quarter.
Shares of Chiquita Brands International (CQB) tumbled Friday after the company posted a $0.74 fourth-quarter non-GAAP loss per share vs. $0.02 EPS on flat sales, higher costs including flood impacts, a weaker euro, and lower performance in salads. The company expects to deliver improved full-year results in 2009.
The Wall Street Journal reported Treasury Secretary Timothy Geithner and White House economic adviser Lawrence Summers were holding their first meeting of the Presidential Task Force on the Auto Industry. The two officials were expected to officially begin considering recovery plans put forth by General Motors (GM) and Chrysler LLC Both auto firms have requested billions of dollars in additional aid.
In economic news Friday, U.S. CPI rose 0.3%, with the core rate up 0.2% in January. That follows a revised 0.8% decline in December headline index (was -0.7%), and a flat reading on the core. Gains were widespread following several months of declines and should help unwind deflation fears. Energy prices rose 1.7%, rebounding from a 9.3% December decline. Gas prices rose 6.0% after a 19.3% drop in December. Food prices edged up 0.1%. In the housing sector, the owners' equivalent rent measure rose 0.3%. Apparel prices rose 0.3%. Medical care costs are up 0.4%, and tobacco prices are up 0.8%.
The euro headed lower vs. the U.S. dollar Friday as worries about trouble in Eastern Europe encouraged investors to flee to safer assets. Traders were nervous about damage to the European banking industry from struggling economies on the euro zone's periphery and in Eastern Europe, says S&P. Also, Markit said its Flash Eurozone Purchasing Managers Index for the dominant service sector slumped to an 11-year survey low of 38.9 in February, considerably below January's 42.2. German and French flash PMI data published earlier showed record lows for the composite index of services and manufacturing sectors.
Sterling was also lower vs. the U.S. dollar. The number of home repossessions in Britain leapt by half in the three months to December compared with the same period in 2007, taking the total for 2008 to the highest since 1996, the Council of Mortgage Lenders said.
Among other stocks in the news Friday, J.C. Penney Co. (JCP) posted $0.95 vs. $1.93 fourth-quarter EPS on an 11% same-store sales drop and a 9.9% total sales drop. The company sees first-quarter same-store sales down 12%-15%, with a $0.20-$0.30 loss per share.
Lowe's Companies (LOW) posted $0.11 vs. $0.28 fourth-quarter EPS on 9.9% lower same-store sales and 3.8% lower total sales. The company sees $0.23-$0.27 first-quarter EPS on a 6%-10% first-quarter same-store sales decline; it also sees $1.04-$1.20 EPS for fiscal 2009, on a 4%-8% same-store sales decline.
Intuit Inc. (INTU) posted better-than-expected $0.34 vs. $0.40 second-quarter non-GAAP EPS on a 5% revenue decline. The company sees $1.38 billion-$1.46 billion in third-quarter revenue, with non-GAAP EPS of $1.57-$1.68. Intuit expects $3.13 billion-$3.25 billion in fiscal 2009 revenue, which would represent growth of 2%-6%, below its prior guidance for 6%-10% growth; it sees fiscal 2009 non-GAAP EPS of $1.78-$1.89.
Red Robin Gourmet Burgers (RRGB) posted better-than-expected $0.38 vs. $0.60 fourth-quarter GAAP EPS on 7.4% lower company-owned same-restaurant sales and 8% higher total revenue. The company said it will not provide earnings or revenue guidance for 2009 at this time. Red Robin expects to open seven new company-owned and three new franchised restaurants in the first quarter. For fiscal 2009, the company now expects to open 13-14 new company-owned units, and franchisees are expected to open 7-8 new restaurants.
CV Therapeutics (CVTX) said its board of directors has thoroughly reviewed and rejected the previously announced unsolicited proposal from Astellas Pharma Inc. to acquire the company at $16.00 per share. Separately, CV Therapeutics posted a $0.60 fourth-quarter loss per share vs. a $0.57 loss as higher costs and expenses offset an 87% revenue rise.