Wall Street finished sharply lower Monday as investors pored over more signs of economic weakness, including a huge round of layoffs in the financial sector.
After a turbulent week that sent the Dow Jones industrials down nearly 340 points, investors found little solace in the latest news. Stocks zigzagged throughout the session, finally giving way to a stream of late-day selling that left the Dow Jones industrials lower by 223 points.
In a signal that banks are still struggling in the wake of massive losses tied to bad mortgage debt, Citigroup Inc. is cutting another 53,000 jobs in the coming quarters. The company said that in addition to job cuts, it plans to lower expenses by about 20 percent and has reduced its assets by more than 20 percent since the first quarter of the year.
Investors were also nervously waiting to see if the nation’s troubled automakers would get a bailout. Senate Democrats, who plan to introduce legislation Monday, want to use part of the $700 billion Wall Street bailout to help prop up Detroit’s Big Three carmakers: General Motors Corp., Ford Motor Co. and Chrysler LLC. A vote was expected as early as Wednesday.
Meanwhile, a better-than-expected reading on industrial production did little to boost investor sentiment. The Federal Reserve said Monday that industrial output rose 1.3 percent last month, after plunging in September by the largest amount in over 60 years. Economists, on average, had expected an increase of 0.2 percent, according to a survey by Thomson/IFR.
Still, the improvement wasn’t encouraging enough, said Anthony Conroy, managing director and head trader for BNY ConvergEx Group, adding that investors want a more concrete sign that the economy could be improving.
“I think we’re seeing a tremendous amount of bad economic data,” he said. “Earnings have basically hit a wall and don’t seem like they are coming back anytime soon.”
The Dow fell 223.73, or 2.63 percent, to 8,273.58, near its lows of the session.
Standard & Poor’s 500 index fell 22.54, or 2.58 percent, to 850.75, while the Nasdaq composite index dropped 34.80, or 2.29 percent, to 1,482.05.
The Russell 2000 index of smaller companies fell 5.16, or 1.13 percent, to 451.36.
Declining issues outpaced advancers by a 2 to 1 margin on the New York Stock Exchange, where consolidated volume came to a light 5.7 billion shares.
The moves on Monday followed a massive sell-off last week that saw the Dow finish down 5 percent; the S&P 500 index down 6.2 percent; and the Nasdaq down 7.9 percent. The major indexes have fallen for four of the past five sessions.
Analysts believe the market is still searching for a bottom after last month’s huge losses, and that the pattern of volatility will continue for some time. Woody Dorsey, president of financial forecasting firm Market Semiotics, said the market is trapped in a seesaw pattern.
“It is a very technical trade,” he said. “The difficulty is there is no dominant positive or negative story that the market is operating on. ... There’s nothing here that people can grab on to.”
In the meantime, investors are still facing a barrage of bad economic news.
Wall Street was also disappointed by a lack of direction taken to resolve the global financial crisis at the meeting of Group of 20 international leaders in Washington this weekend. However, the leaders did pledge to keep working together to provide loans to financial institutions.
In corporate news, Target Corp. on Monday became the latest retailer to post dour results, citing lower sales at established stores as the reason for a 24 percent drop in profit. Lowe’s Cos., meanwhile, said its third-quarter profit also fell 24 percent, better than expected, but it predicted a fourth-quarter profit below the average analyst forecast.
The reports follow a spate of disappointing earnings and forecasts from companies like Macy’s Inc., Starbucks Corp. and Best Buy Co. as they battle a severe pullback in consumer spending. Investors fear that Americans’ clampdown on spending — which accounts for about two-thirds of economic activity in the U.S. — will prolong a worsening economic slump.
On Monday, the Bush White House stressed that it steadfastly opposes drawing funds from the bailout plan to help the nation’s automakers. The administration supports the idea of helping the struggling companies, but said the $25 billion that Democrats favor taking from the rescue plan should come, instead, from a Department of Energy program previously approved to develop fuel-efficient vehicles.
General Motors shares added 17 cents, or 5.7 percent, to $3.18. Ford slipped 8 cents to $1.72.
Meanwhile, the layoffs planned at Citigroup underscored the ongoing distress in the financial sector. The company said total headcount is being reduced by 20 percent from its peak of 375,000 at the end of 2007; the company had already announced in October that it was eliminating about 22,000 jobs from those levels. The New York-based bank has posted four straight quarterly losses, including a loss of $2.8 billion during the third quarter.
The fallout from this year’s global credit crisis has claimed jobs on all corners of Wall Street, from hedge fund managers to floor traders and beyond. Some industry experts forecast the job losses could come close to 200,000 before the year is over.
On Sunday, Goldman Sachs Group Inc. said seven top executives, including Chief Executive Lloyd Blankfein, opted out of receiving cash or stock bonuses for 2008 amid the ongoing credit crisis.
Citi’s leaders may also go without bonuses this year — a move that would effectively amount to a substantial pay cut for the company’s executives.
Citigroup shares fell 63 cents, or 6.6 percent, to $8.89. Goldman sank $4.24, or 6.4 percent, to $62.49.
Government bond prices were higher as investors looked for safety. The three-month Treasury bill’s yield fell to 0.10 percent from 0.14 percent late Friday, and the yield on the benchmark 10-year Treasury note fell to 3.66 percent from 3.72 percent late Friday. Lower yields indicate higher demand.
The dollar fell against most other major currencies, and gold prices also declined.
Light, sweet crude closed at a 22-month low, falling $2.11 to settle at $54.95 a barrel on the New York Mercantile Exchange.
In Asian trading, Japan’s Nikkei index rose 0.71 percent, despite a report showing the second-straight quarterly decline in gross domestic product — signaling a recession. Hong Kong’s Hang Seng Index fell 0.10 percent.
In European trading, Britain’s FTSE 100 fell 2.38 percent, Germany’s DAX index fell 3.25 percent, and France’s CAC-40 fell 3.32 percent.