The Wall Street Journal-20080119-Citigroup Took a 14- Hit in Week- GE and IBM Manage To Swim Against Tide- MBIA and AIG Tumble
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Citigroup Took a 14% Hit in Week; GE and IBM Manage To Swim Against Tide; MBIA and AIG Tumble
The Dow Jones Industrial Average's decline Friday capped a brutal week for wounded financial giants, such as Dow members Citigroup and Merrill Lynch. Exuberance about overseas demand from General Electric and International Business Machines failed to distract the market from the pain on Wall Street and Main Street.
Recent trading feels like the "death by a thousand cuts" that typifies a bear market, said Quincy Krosby, chief investment strategist at Hartford Financial: "Every day the market rolls a bit more into negative territory . . . and another group of leaders gets walloped."
GE shares rose $1.10, or 3.3%, to $34.31 after the conglomerate posted fourth-quarter profit growth, helped by demand from heavy engineering projects overseas. "There are no signs that this global infrastructure boom is slowing," said GE Chief Executive Jeffrey Immelt on a conference call.
IBM rose 2.30, or 2.3%, to 103.40 after Big Blue also logged fourth- quarter growth and said the developing world would compensate for a U.S. slowdown.
But financials were under pressure yet again as investors worried about the impact of ratings cuts for bond insurers.
Citigroup, which shocked the market with the severity of its losses this past week, fell 14% on the week. Merrill Lynch, which reported the biggest quarterly loss of its history, fell 5.2% in the same span.
Ambac, the second-largest bond guarantor, edged down four cents, or 0.6%, to 6.20 after it called off a last-ditch effort to defend its credit rating by raising $1 billion in capital. Fitch Ratings downgraded one of its unit's ratings by two notches.
The guarantee of Triple-A ratings is considered crucial to the insurers' business models, but have come under threat as defaults in all kinds of debt rise.
MBIA fell 67 cents, or 7.3%, to 8.55.
American International Group slid 2.22, or 4.1%, to 52.05 after a firm led by Maurice R. "Hank" Greenberg, the former chief executive and a major shareholder, hired a banker to help evaluate its stake in the insurer.
Washington Mutual rose 1.09, or 8.7%, to 13.55. The thrift reported a $1.87 billion loss in the fourth quarter, and offered little hope of an imminent rebound. In a sign of depressed market sentiment, investors apparently expected worse.
Sprint Nextel fell 2.87, or 25%, to 8.70 after the wireless carrier reported losses of cellphone subscribers, forecast a slowdown in its 2008 growth and warned it would cut thousands of employees.
Under Armour slid 9.05, or 24%, to 28.01. The seller of sweat- resistant sportswear, hailed by some as a new Nike, warned that a costly cross-trainer launch, including a Super Bowl commercial, would hurt earnings in the first half of the year.
The energy sector was another stronghold for the stock market in 2007 that is now crumbling, partly because the recession fears have crimped a rally in oil futures. Halliburton shed 90 cents, or 2.7%, to 32.40.
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Bob Sechler contributed to this article.
