Wall St Ends Down As Credit Worries Spread

Source : The Straits Times, Sep 18, 2007

NEW YORK - US stocks dropped on Monday, led by financial shares, as a rush by savers to withdraw deposits at a large British mortgage lender fueled concerns that turmoil in the credit markets would spread.

Lines of angry customers outside branches of Britain's Northern Rock stirred fears that a crisis of confidence could befall other major banks around the world.

Shares of Citigroup, Bank of America and other leading banks and brokerages fell after shares of Northern Rock's shares plunged more than 35 per cent in London.

The Nasdaq suffered the biggest drop among the major US indexes after a decisive antitrust ruling against Microsoft in Europe. Microsoft dropped 1.1 per cent to US$28.72 (S$43.55).

For the Standard & Poor (S&P) 500, Monday was the first down day after last week's four-day streak of gains.

Oil prices rose to a record for a fourth session, fanning inflation concerns a day before the Federal Reserve is expected to cut interest rates. Higher prices could constrain the Fed as it works to cushion the US economy from the effects of the global credit squeeze.

The cautious mood was reinforced by comments by former Fed Chairman Alan Greenspan, who warned the risk of a recession had increased while inflationary forces loomed larger.

'The overall economy is doing OK, except if you think the credit market is going to get worse and worse. So that's the Sword of Damocles hanging over the market and the economy,' said Al Goldman, chief market strategist at A.G. Edwards in St. Louis.

The Dow Jones industrial average declined 39.10 points, or 0.29 per cent, to close at 13,403.42. The S&P's 500 Index slipped 7.60 points, or 0.51 per cent, to finish at 1,476.65. The Nasdaq Composite Index fell 20.52 points, or 0.79 per cent, to end at 2,581.66.

The US central bank is widely expected to lower rates on Tuesday to cushion the US economy from the financial turmoil. The Federal Reserve has not lowered rates by more than 25 basis points at a single meeting in almost five years, but this time, some analysts believe a deeper cut is needed.

Several big Wall Street companies will report earnings this week that investors fear could reveal a deeper impact from the credit rout.

Oil rose US$1.47 to settle at US$80.57 a barrel, and hit a fresh record intraday of US$80.70.

Trading was below average on the New York Stock Exchange (NYSE), with about 1.11 billion shares changing hands versus last year's estimated daily average of 1.84 billion, while on Nasdaq, about 1.44 billion shares traded, below last year's daily average of 2.02 billion.

Declining stocks outnumbered advancing ones by a ratio of about 2 to 1 on the NYSE and by 7 to 3 on Nasdaq. -- REUTERS