UPDATED: While you were sleeping: Wall Street slides, led by insurers

Thursday 26th February 2009

Stocks on Wall Street fell, as insurers cut their dividends and sales of previously owned homes fell, driving down companies exposed to the housing sector.

The Standard & Poor's 500 Index fell 1.1% to 764.96 and the Dow Jones Industrial Average declined 1.1% to 7271.69. The Nasdaq Composite fell 1% to 1426.12.

Lincoln National Corp. fell 11% to US$11.56, leading a decline in insurers on the S&P 500, after posting its first loss in six years and cutting its dividend payments by 95%. Hartford Financial Services Group sank 7.5% to US$7.42 and Allstate Corp., which cut is dividend payments in half, fell 7% to US$17.35.

US shares also fell after a report from the National Association of Realtors showed sales of previously owned homes fell 5.3% last month to an annual 4.49 million, while the median house price fell 15% from a year earlier to US$170,300. The report showed the 45% of sales were distressed or mortgagee sales.

Home Depot Inc., the home improvement chain, fell 2.3% to US$20.19. Home design company Hovnanian Enterprises fell 10% to 86 cents. American Express fell 6.5% to US$12.75 and Caterpillar dropped 4% to US$24.96.

Bank of America climbed 16% to US$5.42, Citigroup rose 11% to US$2.88 and JPMorgan Chase gained 8.9% to US$22.92 after US regulators set a six-month deadline for America's biggest banks to raise new capital to strengthen their balance sheets. The Treasury said regulators will complete their stress test of banks by the end of March.

Federal Reserve Chairman Ben Bernanke told the House Financial Services Committee that the government may take substantial stakes in lenders such as Citigroup but would avoid nationalizing the banks. He echoed comments he had made the previous day, continuing to hose down fears that shareholders in banks would be wiped out by the moves.

General Motors jumped 18% to US$2.63, leading the Dow higher.

The US dollar gained against the yen and the euro after the US home sales data reduced appetite for risk and swelled demand for the currency as a haven. The yen also weakened after figures yesterday showed Japan's trade deficit widened to the biggest since 1980,

The dollar rose to $1.2722 per euro from $1.2846 yesterday. The yen weakened to 97.61 per dollar from 96.64. The yen traded at 124.21 per euro, little changed from 124.14 the previous day.

Crude oil rose after a US Energy Department report showed petroleum inventories last week, helped by a pick up in demand. Supplies of petrol fell 3.32 million barrels to 215.3 million barrels while consumption rose 1.7% over the past four weeks.

Crude oil for April delivery jumped 7% to US$42.74 a barrel on the New York Mercantile Exchange.

Copper rose for a third day on the prospects of increased demand from the Obama administration's fiscal stimulus plans. The metal used to make pipes and wires climbed 2.5% to US$1.537 a pound on the New York Mercantile Exchange.

Gold fell, extending its slide from more than US$1,000 an ounce last week. Gold for April delivery fell 1.1% to US$959.20 an ounce in New York. Still, the precious metal is the most-favoured investment this year, according to the World Gold Council, which cited a survey of investment advisers, while property ranks lowest.

Ukraine's credit rating was slashed to CCC+ by Standard & Poor's, which said political upheaval in the east European nation made it more likely there would be a default on its loan with the International Monetary Fund.

The reduction stoked fears of contagion from eastern Europe spreading as European companies are forced to prop up their units in the east.

The Dow Jones Stoxx 600 Index slipped 0.3% to 172.31. Swiss private bank EFG International tumbled 36%, leading the index lower. Germany's DAX 30 fell 1.3% to 3846.21, led by a 4.6% slide in E.ON and a 3.6% drop in Volkswagen.

France's CAC 40 slipped 0.4% to 2696.92 as Accor SA fell 6.2% and in London, the FTSE 100 Index rose 0.9% to 3848.98 as Barclays gained 7.5% and ICAP plc advanced 12%.

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