Wall Street stocks slid the most since October, wiping out more than half of last week’s rally, on growing concern the global economic slump is deepening and consumers’ access to credit is shrinking.
Shares of General Electric Co. and Caterpillar Inc. lost nearly 10 percent after a report that manufacturing contracted at the fastest pace in 26 years.
The Institute for Supply Management’s manufacturing index dropped more than forecast to 36.2, the lowest since 1982, the Tempe, Ariz., group said. A reading of 50 is the dividing line between expansion and contraction.
Treasuries rose, sending yields to record lows, as Federal Reserve Chairman Ben S. Bernanke said the central bank may buy bonds to combat the worsening recession. The yield on the three-month Treasury bill slipped to a very slim 0.03 percent.
“The economic news is going to continue to get worse before it gets better,” said Leo Grohowski, chief investment officer for the wealth-management unit of Bank of New York Mellon Corp., which oversees $158 billion. “The biggest single challenge in terms of the economy is the state of housing, and it still remains precarious.”
The S&P 500 sank 8.9 percent to 816.21, with financial stocks in the index tumbling a record 17 percent as a group. The Dow Jones Industrial Average plunged 679.95 points, or 7.7 percent, to 8,149.09 with all 30 companies declining. The Nasdaq Composite Index declined 9 percent to 1,398.07.
American Express Co. and JPMorgan Chase & Co. fell more than 15 percent on Oppenheimer & Co. analyst Meredith Whitney’s prediction that credit-card companies will cut available lending by 45 percent, or more than $2 trillion.
American Express, the largest U.S. credit-card company by purchases, slid $3.67 to $19.64. JPMorgan lost $5.54 to $26.12.
GE, the world’s biggest maker of power-generation equipment, slid $1.67 to $15.50. Merrill Lynch & Co. analysts cut their profit forecasts for the company through 2010, citing a deteriorating environment for industrial and financial companies.
Caterpillar, the largest maker of bulldozers, retreated $4.41 to $36.58.
Goldman Sachs Group Inc. and Morgan Stanley plunged 17 percent and 23 percent, respectively, after Credit Suisse Group AG said the slowdown in investment banking and trading will force the New York firms to report fourth-quarter losses and weaker results for 2009.
“It’s hard to not be concerned about the prospects for a multiyear global economic contraction,” wrote Merrill Lynch analyst Alan Laws.
“The daily flow of news is unrelentingly negative and comprised of many issues that should take quite some time to resolve.”
Pilgrim’s Pride Corp., the largest U.S. chicken producer, filed for Chapter 11 bankruptcy protection after rising grain costs and surplus caused it to post four consecutive quarterly losses. The stock, which plunged 98 percent this year, was halted at 62 cents in NYSE trading.
Limited Brands Inc. had the biggest drop in at least 26 years, tumbling 19 percent to $7.57. Citigroup Inc. analysts cut the owner of the Victoria’s Secret lingerie chain to “hold” from “buy,” citing a 31 percent rise in the stock from Nov. 20 to Nov. 28.
Just two stocks in the S&P 500, AutoNation Inc. and Rohm and Haas Co., rose Monday.
The five consecutive advances in the S&P 500 before Monday’s retreat marked the benchmark gauge’s longest streak of gains since July 2007 and sent it up 19 percent from an 11-year low on Nov. 20, the most over five days since 1933.