UPDATED: While you were sleeping: Dow falls on bailout doubts

Friday 13th February 2009

The Dow Jones Industrial Average fell after US government figures showed a record 4.81 million people were on unemployment benefits in the last week of January and doubts grew about the impact of the government stimulus plans.

The Dow Jones Industrial Average sank 0.1% to 7932.76, reviving from an earlier slump to as low as 7700. The Standard & Poor's 500 Index gained 0.2% to 835.19. The Nasdaq Composite rose 0.7% to 1541.71.

Bank of America dropped 6.1% to US$5.70, Citigroup fell 4.3% to US$3.52 and JPMorgan Chase declined 3.7% to US$25.13. General Motors dropped 6.6% to US$2.56, leading the Dow lower, and General Electric fell 3.7% to US$11.50. Exxon Mobil fell 1.1% to US$73.82 after the price of crude oil fell to a three-week low. Coca-Cola Co. rose 7.5% to US$44.39, leading gainers on the Dow after the world's biggest soft-drink maker posted a smaller than expected drop in fourth-quarter earnings.

US business inventories fell 1.3% in December to the lowest in eight years, according to Commerce Department figures, suggesting companies are reducing their stock levels as sales tumble.

The value of unsold goods fell 1.3%, while sales declined 3.2%, according to the report.

A separate report showed US retail sales unexpectedly rose 1% last month, on spending on fuel, food and clothing, according to the Commerce Department. Ex-auto retail sales gained 0.9%. Investors said the sales gain may evapourate this month, reflecting the rising tide of jobless.

The US House of Representatives is due to vote tomorrow on the revised version of President Barack Obama's economic stimulus package, now watered down to US$789 billion from the US$838 billion bill that the Senate approved this week.

Obama has pledged to save or generate 3.5 million jobs with the spending plans. Among casualties of the original bill are a proposal for a US$500 payroll tax cut for individual taxpayers and a US$1,000 reduction for families.

US 30-year Treasury bonds fell after a sale of US$14 billion of the debt. The yield on 30-year Treasuries rose 5 basis points to 3.5%.

The US dollar rose against most currencies, climbing to $1.2799 per euro from $1.2906 as stocks fell and amid concern the US stimulus efforts won't be sufficient, stoking demand for the currency as a haven. The dollar was at 90.55 yen from 90.40. Japan's currency strengthened to 116.1 per euro from 116.66.

Crude oil fell to a three-week as stockpiles in the US climbed, a sign that demand for fuel may be subsiding. Crude for March delivery fell 5.5% to US$33.97 a barrel on the New York Mercantile Exchange.

Copper for three-month delivery fell 1.1% to US$3,420 a ton. Gold extended its advance, reaching more than US$950 an ounce as the investors sought the precious metal as a haven. Gold futures for April delivery rose 0.5% to US$949.20 an ounce in New York.

In Europe, the Dow Jones Stoxx 600 Index fell 1.3% to 190.64 as more companies posted earnings that missed analysts estimates. Electricite de France, the biggest operator of nuclear reactors, fell more than 3%. Bank of Ireland dropped 17% and Fortis fell 16%.

Germany's DAX 30 fell 2.7% top 4407.56 and France's CAC 40 dropped 2.1% to 2964.34. In London, the FTSE 100 declined 0.8% to 4202.24. Rio Tinto dropped 1.5% after Moody's Investors Service said it may cut the miner's credit rating on Chinalco's plan to invest US$19.5 billion to buy assets.

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