Wall Street plunged on Thursday with the Dow Jones average dropping below 7,500 to a six-year low on financial woes and grim economic outlook.
The Dow Jones industrial average was down 89.68, or 1.19 percent, to 7,465.95, the lowest close since October 2002. The Standard & Poor's 500 index fell 9.48, or 1.20 percent, to 778.94, and the Nasdaq composite index fell 25.15, or 1.71 percent, to 1,442.82.
Concerns about credit-card defaults sent financial stocks to a 14-year low. Financial stocks, which lost 57 percent of its value last year, have fallen 39 percent this year as rising unemployment casts doubt on the ability of consumers to stay current on other forms of debt.
The prospect that the federal government will nationalize some banks, rendering their equity worthless, is dogging Bank of America and Citigroup in particular.
Bank of America, the largest U.S. bank by assets, fell for a fifth straight day, dropping 14 percent to 3.93 dollars. A close at that price would be its lowest since 1984. Citigroup, which has received 45 billion dollars in U.S. bailout funds, tumbled 13.75 percent to a 17-year low of 2.51 dollars.
Prudential Financial, the second-largest U.S. life insurer, fell 15.88 percent to 19.02 dollars after its short-term debt rating was lowered by Fitch Ratings, rendering the holding company ineligible for the U.S. commercial paper program.
MIXED ECONOMIC READING
U.S. leading economic indicators increased unexpectedly for a second straight month in January, said an economic research group on Thursday.
The New York-based Conference Board said its Leading Economic Index (LEI) rose 0.4 percent last month, following a 0.2 percent increase in December and a 0.7 percent decline in November.
"The economy has been in recession for over a year, but the level of intensity may begin to ease over the next few months," said Ken Goldstein, economist at the Conference Board. "The second half of 2009 may see a period of anemic growth."
However, "a return to robust growth may not occur until well into 2010, even if the long climb starts a few months from now," warned Goldstein.
The Philadelphia Federal Reserve reported that manufacturing sector in the region weakened in February. The index dropped to -41.3 from -24.3, well below the consensus -25.0 and the lowest reading since October 1990.
"This is grim," said Ian Shepherdson, Chief U.S. Economist at High Frequency Economics. "Unfortunately the drop in the Philly index chimes with the fall in the Empire State index reported on Tuesday."
"The January upturn was temporary; it did not mark the start of a sustainable recovery or even a slowing in the rate of decline of manufacturing output. The industrial downturn seems, if anything, to be worsening," he added in a note to clients.
Hewlett-Packard (HP), the largest hardware and software maker, declined around 8 percent, after the company missed sales expectations and cut its full-year profit outlook.
Apple shares skidded after NPD Group reported that sales at the computer and iPod maker's retail stores fell 6 percent in January, the first drop in three years.
The U.S. Labor Department reported that initial jobless benefit claims reached 627,000 last week, unchanged from the previous week. But the number of people receiving unemployment benefits jumped to an all-time high of 4.99 million people. It is the fourth consecutive week that the reading has been at record level.
Meanwhile, another government report showed that inflation at the wholesale level surged unexpectedly in January. Labor Department said that wholesale prices increased by 0.8 percent last month, which is the biggest gain since last July and much more than a 0.2 percent increase economists had expected.
Federal Reserve officials lowered their projections for economic growth this year on Wednesday, with most seeing a contraction of 0.5 percent to 1.3 percent. Gross domestic product declined last quarter at a 3.8 percent annual pace, the most since1982.
The U.S. economy will keep deteriorating before reaching a low point in the second half of this year, an economic adviser to President Barack Obama said on Thursday.