By Kate Gibson
U.S. stocks declined Monday after a mixed start, with financial
shares weighing on the broader market as firms detailed their
exposure to the alleged $50 billion fraud by Bernard Madoff.
"What's amazing is the magnitude of bad news that we've had to
digest during the last two weeks, but still the market remains
resilient," said Art Hogan, chief market strategist at Jefferies
& Co.
After climbing two out of the last three sessions, the Dow Jones
Industrial Average (DJI) on Monday shed 110.55 points to 8,519.13,
with 25 of its 30 components posting losses.
As with the broader market, financials weighed the most on the
blue-chip index, with J.P. Morgan Chase (JPM) off 6.1% and American
Express Co. (AXP) down 4%. Bank of America Corp. (BAC) declined
4.7% and Citigroup Inc. (C) fell 3.4%.
The S&P 500 (SPX) declined13.08 points to 866.65, with
financials down the most, while energy fronted the S&P's
limited gains among the index's 10 industry groups.
The bigger laggards among financial shares included Developers
Diversified Realty (DDR), off 14.1%, and ProLogis (PLD), down
9.5%.
Noteworthy gains among financials included Peabody Energy Corp.
(BTU), lately up 8.3%, and Consol Energy Inc. (CNX), up nearly
5%.
The Nasdaq Composite (RIXF) shed 37.48 points to 1,503.24.
Crude-oil futures rose before a meeting of the Organization of
Petroleum Exporting Countries later in the week, where production
is expected to be cut again. Light crude for January delivery
climbed $1.57 to $47.85 a barrel in early trade on the New York
Mercantile Exchange. .
The dollar fell sharply against other major currencies, with the
dollar index (DXY) down 1% to 82.11. .
"The uncertainty surrounding the fate of the U.S. auto industry,
coupled with the market's expectation of an imminent Fed rate cut
on Tuesday, pressured the dollar to start the week in a distresses
state," said Rebecca Lia, a currencies analyst with Wachovia
Corp.
Volume on the New York Stock Exchange neared 287 million, with
decliners overtaking advancers 5 to 2. On the Nasdaq, more than 174
million shares traded hands, and decliners beat advancers nearly 2
to 1.
Record contraction
The economic calendar for Monday included the December Empire
State Index, with the gauge of manufacturing activity in the New
York region contracting at a record pace in November.
In a separate report, the Federal Reserve said output of the
nation's factories, mines and utilities declined 0.6% in November
on broad-based weakness across manufacturing industries. .
Investors will also be looking ahead to Tuesday's Federal
Reserve interest-rate decision, where rates are expected to come
down half a point to 0.5%. .
"The FOMC meeting should be overshadowed this week by earnings
from Goldman Sachs (GS) on Tuesday and Morgan Stanley (MS) on
Thursday," said Marc Pado, U.S. strategist at Cantor
Fitzgerald.
The Wall Street Journal reported Monday that the Bush
administration is sizing up what terms to seek from the auto
industry in return for a bailout, including whether to push the
companies to file for bankruptcy.
The administration is discussing a rescue totaling $10 billion
to $40 billion or more, the Journal reported.
"We've gone from expecting to hoping," said Hogan of the efforts
to shore up the embattled industry.
Shares in General Motors Corp. (GM) and Ford Motor Co. (F) both
rose in late morning trade.
As more details of the alleged fraud by former Nasdaq Chairman
Bernard Madoff emerged, Banco Santander (STD) said its customers
had an exposure of around $3.1 billion though its Optimal
asset-management business, while Japan's Nomura (NMR) has an
exposure of around $302 million.
Former Dow component Honeywell International Inc. (HON) shares
5.3% after the industrial company reaffirmed its full-year
guidance. .
Late Sunday Huntsman Corp. (HUN) ended its agreement to be
acquired by Hexion Specialty Chemicals Inc. and reached a
settlement over litigation. Huntsman said it is due payments
totaling $1 billion.
In international markets, Japan's Nikkei 225 rose 5.3% and the
French CAC 40 index added 0.3%.
Stocks on Friday erased early losses to close higher after the
Bush administration said it would step in to prevent a failure of
U.S. automakers amid fears that more job losses would deepen the
recession. The Dow Jones Industrial Average finished up 64.59
points, the S&P 500 climbed 6.14 points and the Nasdaq
Composite added 32.84 points.
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