US stocks end worst week since 9/11

October 4, 2008

US stocks slid, capping the worst week for the Standard & Poor's 500 Index since the 2001 terrorist attacks, on concern the $US700 billion ($900 billion) bank bailout isn't enough to unlock credit markets and prevent a recession.

JPMorgan Chase, the biggest US bank by deposits, CB Richard Ellis, the largest commercial real-estate brokerage, and Lennar Corp., the second-biggest homebuilder, fell more than 7% even after the House of Representatives approved the plan to buy banks' troubled assets. Citigroup dropped 18%, its steepest plunge since 1988, after Wachovia agreed to be acquired by Wells Fargo, snubbing a deal to sell its banking operations to Citigroup.

The S&P 500 declined 15.04 points, or 1.4%, to 1,099.24. The Dow Jones Industrial Average lost 157.15 points, or 1.5%, to 10,325.7. The Nasdaq Composite Index slipped 29.33, or 1.5%, to 1,947.39. More than three stocks decreased for each that rose on the New York Stock Exchange.

``Once you get over one hurdle, you start looking at the next hurdle, and the next one is the weakness in the US,'' said John Davidson, president of PartnerRe Asset Management in Greenwich, Connecticut, which invests more than $US12 billion. ```There's doubt that we'll avoid a recession.''

The S&P 500 extended its loss over the past five days to 9.4%. The benchmark index for US stocks tumbled 4% yesterday as reports on jobless claims and factory orders reignited concern the economy is sinking into a recession. The Dow lost 7.3% in the week and the Nasdaq tumbled 10.8%.

Libor record

JPMorgan slid $US3.95 to $US45.90. CB Richard Ellis slumped 12% to $US9.45. Lennar fell $US1.81 to $US12.08.

Financial shares in the S&P 500 declined 4% as a group after some money-market rates jumped to records.

The London interbank offered rate, or Libor, that banks charge each other for three-month loans in euros increased to 5.33%, an all-time high, the British Bankers' Association said. The rate for dollars climbed to 4.33%, the highest since January. The Libor-OIS spread, a gauge of cash scarcity among banks, widened to a record and Asian bank rates climbed to the highest levels in at least nine months.

Discover Financial Services, the fourth-largest US credit-card company, slid $US1.89, or 15%, to $US11.07. MBIA Inc., the world's largest bond insurer, tumbled $US1.15, or 10%, to $US10.35.

The House voted on the bailout after it was refashioned to entice enough votes for passage. The House's rejection of the original bill on Sept. 29 sent the Dow average down more than 777 points, its biggest point drop ever.

The bailout comes after global banks racked up almost $US590 billion in credit losses and asset writedowns stemming from the worst housing slump since the Great Depression.

Bloomberg News