- The Washington Times - Tuesday, January 20, 2009

NEW YORK | The dawn of the Obama presidency could not shake Wall Street from its dejection over the banking industry’s growing problems.

After hearing the new president’s inaugural address Tuesday, investors went back to unloading stocks, sending the major indexes downmore than 4 percent and the Dow Jones Industrial Average down more than 330 points.Traders on the floor of the New York Stock Exchange paused at times to watch the inauguration ceremony and Mr. Obama’s remarks, but the transition of power didn’t erase investors’ intensifying concerns about the struggling economy.

Financial stocks led the market lower. Investors already nervous about the state of U.S. banking were rattled Tuesday by the Royal Bank of Scotland’s forecast that its losses for 2008 could top $41.3 billion, the biggest ever for a British corporation. The British government injected more money into the struggling bank Monday. The government also announced another round of bailouts for the country’s banks.

The moves in Britain are designed to insure banks against further losses and are similar to steps the U.S. government has made to protect Citigroup Inc. and Bank of America. Both companies on Friday reported multibillion-dollar fourth-quarter losses. Citigroup also said it planned to split its operations in two in an effort to return to profitability.

Meanwhile, the Financial Times said that Bank of America will begin cutting as many as 4,000 jobs in its capital-markets unit as it consolidates its operations in that division with those of recently acquired Merrill Lynch & Co.

Investors were uneasily awaiting most companies’ earnings reports to see how badly industries beyond banking are hurting.

“Today’s market is under pressure with fourth-quarter-earnings season (increasing this week), and it may not have been effectively priced into the market yet,” said Arthur Hogan, chief market analyst at Jefferies & Co.

State Street Corp., which had been performing better than most financial services companies, reported a 71 percent drop in fourth-quarter profits as it was forced into billions of dollars in write-downs on its commercial-paper program and investment portfolio. The bank also said it expects 2009 operating earnings to be flat with 2008, below the company’s long-term goal of 10 percent to 15 percent growth. State Street plunged $17.18, or 47 percent, to $19.16.

And Regions Financial Corp., which reported a fourth-quarter loss of $6.24 billion, was weighed down by a hefty charge to reflect declining value in its banking reporting unit. Its stock plunged to a 24-year low of $4.67. It edged back up to $4.71, down $1.36, or 22.41 percent.

The Dow Jones Industrial Average fell 332.13, or 4.01 percent, to 7,949.09, its lowest close since Nov. 20, when the blue chips ended at 7,552.29 - their lowest point in more than five years. It was also the blue chips’ biggest drop since Dec. 1.

During much of Mr. Obama’s address, the average was down about 150 points.

On Inauguration Day, the Dow falls about three-quarters of the time. Traders hadn’t appeared so focused on TV screens since Sept. 29, when the House initially voted against the banking bailout package and the Dow tumbled 777 points.

Broader stock indicators also fell sharply Tuesday. The Standard & Poor’s 500 index fell 44.90, or 5.28 percent, to 805.22, and the Nasdaq composite index fell 88.47, or 5.78 percent, to 1,440.86.

The Russell 2000 index of smaller companies fell 32.80, or 7.03 percent, to 433.65.

Losing issues outnumbered gainers by about 9 to 1 on the New York Stock Exchange, where volume came to 1.72 billion shares.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.37 percent from 2.32 percent late Friday. The yield on the three-month T-bill, in demand because it is considered one of the safest investments, rose to 0.12 percent from 0.11 percent late Friday.

Light, sweet crude rose $2.38 to $38.89 a barrel on the New York Mercantile Exchange.


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