U.S. stocks slide as banks take a gi­ant hit

Wor­ries over Deutsche Bank spur wider losses

Baltimore Sun - - BUSINESS - By Mar­ley Jay

NEW YORK — U.S. stocks slumped Mon­day, and banks took the big­gest losses.

Deutsche Bank plunged as in­vestors wor­ried about the fi­nan­cial health of Ger­many’s largest bank. Pfizer pulled drug­mak­ers down af­ter it an­nounced it won’t break up into two com­pa­nies.

Stocks fell for the sec­ond day in a row. Banks were hurt by a drop in bond yields, which means lower in­ter­est rates and smaller prof­its on loans. Con­sumer com­pa­nies fell as home im­prove­ment re­tail­ers were af­fected by a slow­down in sales of new homes.

Euro­pean banks tum­bled af­ter the Ger­man mag­a­zine Fo­cus said Deutsche Bank won’t get a gov­ern­ment Traders on Mon­day pass where Deutsche Bank is traded at the New York Stock Ex­change. bailout if it asks for one. Its re­port, pub­lished Fri­day, cited “gov­ern­ment cir­cles” as its source.

“There’s some stress in the bank­ing in­dus­try there and ques­tions about whether gov­ern­ments have the will to step in,” said Steve Chi­avarone, as­so­ci­ate port­fo­lio man­ager for Fed­er­ated In­vestors.

The Dow Jones in­dus­trial av­er­age lost 166.62 points, or 0.9 per­cent, to 18,094.83. The Stan­dard & Poor’s 500 in­dex fell 18.59 points, or 0.9 per­cent, to 2,146.10. The Nas­daq com­pos­ite dropped 48.26 points, or 0.8 per­cent, to 5,257.49. Stocks are com- ing off two weeks of solid gains, and the Nas­daq set all-time highs twice last week.

Fo­cus’ ar­ti­cle also said the Ger­man gov­ern­ment won’t help Deutsche Bank by in­ter­ven­ing with U.S. of­fi­cials who want it to pay $14 bil­lion to end an in­ves­ti­ga­tion into its sale of mort­gage-backed se­cu­ri­ties. The bank’s U.S.-listed shares tum­bled 90 cents, or 7.1 per­cent, to $11.85. The stock is down 51 per­cent this year.

Other banks also fell. Gold­man Sachs took the largest loss among Dow stocks and sank $3.65, or 2.2 per­cent, to $161.48. Cit­i­group shed $1.26, or 2.7 per­cent, to $45.89.

Bond prices rose. The yield on the 10-year U.S. Trea­sury note fell to 1.58 per­cent from 1.62 per­cent. That also af­fects banks, as lower bond yields mean lower in­ter­est rates and smaller prof­its on lend­ing.

Stocks over­seas also weak­ened. The DAX in Ger­many dropped 2.2 per­cent, and France’s CAC 40 fell 1.8 per­cent. In Bri­tain, the FTSE 100 was down 1.3 per­cent. Ja­pan’s bench­mark Nikkei 225 edged down 1.3 per­cent. South Korea’s Kospi slipped 0.3 per­cent, and Hong Kong’s Hang Seng lost 1.7 per­cent.

Home De­pot and Lowe’s sank af­ter the gov­ern­ment said sales of new homes fell al­most 8 per­cent in Au­gust.

Home De­pot shed $2.34, or 1.8 per­cent, to $125.45, and Lowe’s fell $1.54, or 2.1 per­cent, to $70.81.

Oil prices bounced higher as in­vestors mon­i­tor a meet­ing of oil pro­duc­ers in Al­ge­ria. Bench­mark U.S. crude rose $1.45, or 3.3 per­cent, to $45.93 a bar­rel in New York. Brent crude, the in­ter­na­tional bench­mark, rose $1.46, or 3.2 per­cent, to $47.35 a bar­rel in London. Oil ex­plo­ration com­pa­nies rose the most. Transocean climbed 42 cents, or 4.6 per­cent, to $9.52, and No­ble En­ergy added 60 cents, or 1.8 per­cent, to $33.62.

RICHARD DREW/AP

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