While you were sleeping: Wall St drops, bank CEOs at risk, oil falls

Monday 18th May 2009

Stocks fell on Wall Street on Friday as the price oil dropped and a top US regulator said some bank chiefs may lose their jobs as a result of government scrutiny.

The Dow Jones Industrial Average slipped 0.8% to 8268.64 and the Standard & Poor’s 500 fell 1.1% to 882.88. The Nasdaq Composite fell 0.5% to 1680.14.

Chevron Corp. slid about 2% to US$65.88 and Exxon Mobile declined 0.9% to US$69.11 after the price of crude oil tumbled almost 4%.

Crude oil for June delivery dropped 3.9% to US$56.34 a barrel on the New York Mercantile Exchange amid concern the global economy isn’t heading for a speedy rebound and demand will remain weak.

Bank of America fell 5.7% to US$10.67, leading the Dow lower, American Express dropped about 2% to US$24.23 and Citigroup fell 2% to US$3.48 after reports that Federal Deposit Insurance Corp. chairwoman Sheila Bair told Bloomberg Television that management of lenders “needs to be evaluated.”

The FDIC subsequently released a statement saying Bair didn’t specifically refer to CEOs. JPMorgan Chase fell 1.8% to US$34.91.

General Motors fell 5.2% to US$1.09 after the automaker that may be headed for bankruptcy said it will eliminate 1,600 US dealers as it tries to slash billion of dollars of debt.

A gauge of volatility jumped on Friday as some equity options and stock index options expired. The Chicago Board Options Exchange volatility index, or VIX, surged 5.6%. The VIX is sometimes referred to as Wall Street's ‘fear gauge.’

Department store operator JC Penney slipped 0.4% to US$26.54 and clothing chain Abercrombie & Fitch fell 4.2% to US$26.10 after the retailers reported worse-than-expected results, fueling concern American consumers are conserving their cash.

JC Penny reported first-quarter profit tumbled to US$25 million from a year-earlier US$120 million, while Abercrombie posted a net loss of US$26.8 million, or 31 cents per share, almost three times as big a loss as expected.

US consumer confidence rose this month, adding to evidence optimists say means the worst of the economic slump is over. The Reuters/University of Michigan preliminary index of consumer sentiment gained to 67.9 this month from 65.1 in April.

The expectations gauge rose to 69 from 63.1 last month, while the current conditions gauge, which reflects Americans’ willingness to buy big-ticket items, fell to 66.2 from 68.3.

Federal Reserve figures showed US industrial production fell 0.5% last month, the smallest decline since October, while the New York Fed’s Empire state manufacturing index rose to a better-than-expected minus 4.6.

The 0.5% decline may indicate the slump is abating after production tumbled 1.7% in March.

The US dollar and the yen strengthened against the euro after weak data from the euro region on Friday nudged investors toward the relative safety of the two largest currencies.

The euro weakened 1% to $1.3492 and fell 1.8% to 128.39 yen. The dollar slipped 0.8% to 95.19 yen.

The European economy contracted 2.5% in the first quarter from the final three months of 2008, the biggest slump in at least 13 years, according to the European Union’s statistics office.

Economists had expected a 2% contraction, after European gross domestic product shrank 1.6% in the fourth quarter. The euro-zone economy contracted 4.6% from a year earlier.

Germany’s GDP slumped 3.8% in the first quarter, the largest contraction since 1970. France’s GDP shrank 1.2% and Italy’s 2.4%.

Gold futures for June delivery edged up 0.3% to US$931.30 an ounce on the New York Mercantile Exchange, rounding out a weekly gain of 1.8%.

Copper for delivery in three months rose 0.3% to US$4,460 a metric ton on the London Metal Exchange to be 4.8% lower last week.

European shares advanced on Friday. The Dow Jones Stoxx 600 Index rose 0.6% to 202.92.

UK bank Barclays climbed 5.8% after saying it was in talks to sell its asset management unit, Barclays Global Investors, in a deal that could be worth US$10 billion.

Fortis surged 12%, leading the European index higher, after posting a first-quarter profit.

The UK’s FTSE 100 fell 0.3% to 4348.11, France’s CAC 40 climbed 0.4% to 3169.05 and Germany’s DAX Index slipped 0.02% to 4737.50.

Businesswire.co.nz

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