- The Washington Times - Thursday, January 15, 2009

Wall Street whipsawed through a tumultuous session and ended with modest gains Thursday as concerns eased over more bank losses.

At the close, the Dow Jones Industrial Average rose 12.35, or 0.15 percent, to 8212.49, the first time in seven sessions that it ended in positive territory. The Nasdaq, laden with hi-tech stocks, went up 22.20, or 1.49 percent, to 1511.84. The broader Standard & Poor’s 500 inched up 1.12, or 0.13 percent, to 843.74.

After the close, chipmaker Intel Corp. said its fourth quarter profit plunged 90 percent because of a lack of demand. Its net income dropped to $234 million, or 4 cents a share, compared with $2.27 billion, or 38 cents a share, for the same three-month period a year earlier.

The markets opened lower and slid more than 200 points, falling below 8,000 for the first time since Nov. 21. But they rebounded over speculation that Congress will vote to use some of the remaining $350 billion in bailout money to help ailing banks, chiefly Bank of America. Bank stocks fell.

At the same time, the Labor Department reported an unexpected jump in new jobless claims last week to more than half a million people.

Bank stocks, which are components of the Dow, have been dragging down the markets for the past several days because of concern that credit and mortgage losses will cause them to fail the way Lehman Brothers collapsed in the fall. Shares of both Bank of America and Citigroup fell about 25 percent.

The drop in the prices of shares of both banks “looks like a redux of Lehman,” Tom Sowanick, the chief investment officer of Clearbrook Financial LLC of Princeton, N.J., told The Washington Times.

He suggested that the banks were writing down mortgages to declare them as unrealized losses, making their balance sheets look worse, so that the federal government will come to the rescue, either by finding a merger candidate or with bailout money.

The Treasury Department did not come to the aid of Lehman Brothers but has helped other banks since then with bailout money requested by the Bush administration and approved by Congress.

“I find it shocking that every quarter there are so many things to write down,” Mr. Sowanick said of the banks.

Todd Leone, managing director of Cowan and Co. in New York, told The Washington Times that the falling prices of the bank stocks were affecting the markets generally.

“There’s no faith in these stocks rights now,” he said. “The markets are not going to go up unless these stocks stabilize.”

The Labor Department reported that the number of people filing requests for unemployment benefits increased to a seasonally adjusted 524,000 during the week ended Saturday from an upwardly revised number of 470,000 the week before. Analysts had expected the total to be 500,000, the Associated Press reported.

A reason for the sudden upsurge may be that people who were dismissed from their jobs in December may have waited until after the holidays to file for unemployment insurance. There had been decreases in the numbers of new filings during the last two weeks of 2008.

The four-week average of claims, which takes into account fluctuations in the numbers, dropped by 8,000 to 518,500 last week, the Labor Department said. And the number of people who continue to request benefits fell by 100,000 to 4.5 million, a drop from an upwardly revised figure of 4.6 million the previous week, possible good news.

Nevertheless, the number of people seeking jobless claims still was the highest since 1982, when the country was emerging from a recession. Jobless claims were 2.7 million a year ago. The unemployment rate stands at 7.2 percent, and some economists expect it to go into double digits before the end of this year.

The Dow dropped another 248 points Wednesday during light trading, apparently saddled with investor worries about the heavily battered banking sector as Citigroup sold off a controlling interest in its brokerage arm, Smith Barney, to Morgan Stanley in a bid to raise $2.7 billion.

But the financial sector got some reprieve when JPMorgan Chase reported a small fourth quarter profit of $702 million, or 7 cents a share, which was better than analysts had expected but was a long way from the $2.97 billion, or 86 cents a share, the company reported during the same period a year ago. Shares of JPMorgan rose 81 cents at the open Thursday to $26.72.

The firm’s CEO, Jamie Dimon, said in a statement that the earnings were “very disappointing” and warned that there may be worse to come as it absorbs Bear Stearns Cos. And Washington Mutual Inc., two banks it bought last year.

“If the economic environment deteriorates further, which is a distinct possibility, it is reasonable to expect additional negative impact on our market-related businesses, continued higher loan losses and increases to our credit reserves,” he said.

The firm added $4.1 billion to loan loss reserves.

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