The Wall Street Journal-20080116-Airlines- Card Issuers Lead Plunge
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Airlines, Card Issuers Lead Plunge
As stocks fell, reports from Citigroup, the Commerce Department and Williams-Sonoma hammered home the image of a consumer struggling to pay bills and cutting back on purchases.
Some airlines gained, but Boeing fell as the vigil for its Dreamliner aircraft was extended again.
Contributing to the Dow Jones Industrial Average's 277.04-point plunge, Citigroup was down $2.12, or 7.3%, to $26.94. The bank posted a $9.83 billion fourth-quarter loss, writing down about $18.1 billion in losses on mortgage securities, and cut its dividend. As delinquent loans spread from mortgages to credit cards, hope that the end of bank losses may be near is fading fast.
Citigroup also set aside provisions for delinquencies on credit- card, auto loans and other consumer debt.
That corresponded with a warning from American Express, which recently said customers were falling behind on payments and reining in spending. AmEx was another leading decliner on the Dow, falling 1.73, or 3.9%, to 42.77.
AT&T, one of the first blue-chip companies outside the retail area to warn that customers were having difficulty making payments, lost 88 cents, or 2.3%, to 37.63.
Among other financials, Merrill Lynch declined 2.96, or 5.3%, to 53.01. Between them, Citigroup and Merrill plan to raise an additional $21 billion in capital to shore up balance sheets ravaged by credit- market losses. As part of that initiative, a Kuwaiti sovereign-wealth fund will invest $3 billion in Citigroup and $2 billion in Merrill.
State Street fell 5.04, or 5.9%, to 79.82. The securities custodian, previously seen as inured to the "subprime" crisis, built up a legal reserve related to mortgage fallout at its asset-management operations.
First American rose 2.08, or 7%, to 31.44 after the company planned to split its home and title-insurance operations from its information- technology business, which serves home lenders and other corporations.
Data from the Commerce Department showing a drop in December retail sales echoed the chorus of bad holiday tidings from stores.
Williams-Sonoma fell 2.19, or 9.9%, to 20.01 as the seller of homeware became the latest retailer to cut its outlook because of weak holiday sales and to warn of continuing softness in January consumer spending.
Apple (Nasdaq) declined 9.74, or 5.5%, to 169.04. The seller of computers and consumer electronics launched a movie-rental service via iTunes and said it had sold more than four million iPhones world-wide, already riding down a large portion of the smart-phone market.
Netflix (Nasdaq), which recently expanded its own computer-streaming business, slipped 72 cents, or 3.2%, to 22.05.
Among other tech stocks, Intel (Nasdaq), which reported a shortfall in fourth-quarter profit after the bell, declined 39 cents, or 1.7%, to 22.69.
Northwest Airlines rose 1.37, or 8.6%, to 17.38; and UAL (Nasdaq), parent of United Airlines, rose 1.64, or 5%, to 34.57. The Wall Street Journal reported Delta had commenced wooing each of those airlines separately, seeking a merger with one or the other that would create the largest airline in the U.S.
Delta Air Lines rose 68 cents, or 4.4%, to 15.98.
As the U.S. agreed to weaponry sales to Saudi Arabia, Raytheon rose 1.06, or 1.7%, to 62.64, while Northrop Grumman advanced 1.58, or 2%, to 81.10.
But shares of defense and aerospace company Boeing fell 3.81, or 4.7%, to 77.86 after a report that its Dreamliner 787 jet program, already about six months behind schedule, will likely face further delays.
Tenet Healthcare rose 14 cents, or 3.3%, to 4.44 after Deutsche Bank raised its rating on the hospital operator to buy from hold, saying Wall Street earnings expectations fail to reflect cost cutting and the progress of a turnaround plan.
Genentech slipped 1.02, or 1.4%, to 69.62. Sales of some major drugs, including the cancer treatment Avastin, missed Wall Street targets.
American depositary shares of New Oriental Education & Technology plunged 17.68, or 22%, to 63.23 as the Chinese operator of English- language schools projected its fiscal third-quarter revenue growth not quite as dramatic as investors expected.
