Stocks lower as tech worries outweigh bank news
NEW YORK -- Losses in technology shares dragged stocks lower Monday even as the government announced its latest plans for shoring up ailing U.S. banks.
Financial stocks, which led the market in the early going, were mostly higher after the government's latest pledge that it plans more aid for the banking system. The Treasury and other departments said in a joint statement, "the U.S. government stands firmly behind the banking system during this period."
The statement followed a Wall Street Journal report that Citigroup c is in talks for the U.S. government to boost its stake in the bank.
"It's only a very partial picture of what we may get," said Quincy Krosby, chief investment strategist at The Hartford. "This proverbial lack of clarity is damaging market psychology."
Investors sold off technology stocks amid growing fears that no industry is safe from the prolonged recession. The Journal reported Sunday that Yahoo's yhoo new chief executive is planning a company-wide reorganization.
"There's no where to hide anymore," said Jim Herrick, director of equity trading at Baird & Co.
Federal regulators said Monday they will launch a revamped program that includes the option of increasing government ownership in financial institutions without having to pour more taxpayer money into them. That would be done through a technical change converting the status of the government's shares.
Stocks tumbled last week as investors worried that the government would be forced to funnel more money to Citigroup and Bank of America bac and, in the process, completely wipe out shareholders.
When the overall number of common shares is increased, that would reduce the value of existing shares. But it would leave the bank in private hands and investors seemed to welcome the report because it reduced some uncertainty.
Bond prices fell Monday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.80% from 2.79% late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.27% from 0.26% Friday.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude slipped 3 cents to $40 per barrel on the New York Mercantile Exchange.
Major stock indexes tumbled more than 6% last week as investors worried about nationalization of several big banks and the health of the overall economy. The Dow industrials on Thursday ended at their lowest level since Oct. 9, 2002, the bottom of the last bear market.
Investors were disappointed to see stocks close below the Nov. 20 levels that many hoped would mark the bottom of the market's pullback from its October 2007 highs. This week, investors are waiting to see whether the Dow can stay above the October 2002 closing low of 7,286.27.
"The Dow is at a really, really major support level," Rovelli said. He said investors would be emboldened if the Dow can hold above the 7,286 mark.
Analysts expect the market to remain volatile this week ahead of further details on how the government plans to prop up the financial system.
"People don't want to see the banks nationalized but they know something has to be done for Citi," said Dave Rovelli, managing director of trading at brokerage Canaccord Adams in New York.
Overseas, Britain's FTSE 100 fell 0.91%, Germany's DAX index fell 1.90%, and France's CAC-40 slipped 0.82%. Earlier, Japan's Nikkei stock average fell 0.54%.