US stocks ended a turbulent week by plunging to six-year lows amid concerns over ailing financial institutions and their prospective nationalization.
The Dow Jones Industrial Average fell a hefty 6.17 percent over the week to its lowest level since October 2002 at 7,365.67 on Friday, dogged by concerns that key banks such as Bank of America and Citigroup will be taken over by the government. The tech-rich NASDAQ composite fell 6.07 percent over the week to 1,441.23 and the broad-market Standard & Poor’s 500 tumbled 6.87 percent to 770.05.
The market continued to falter even after US President Barack Obama signed a bill for a nearly US$800 billion economic stimulus package and unveiled a multibillion dollar plan to contain a home mortgage crisis at the epicenter of global financial turmoil.
Investors zeroed in on the financial stocks amid concerns over bad assets troubling banks and rumors over their nationalization which the Obama administration moved to dispel.
“Financial stocks continue to represent the biggest concern for the broader market, and will continue to do so in the coming week,” Briefing.com said.
Uncertainty remain “regarding the depth and duration of the global recession and exacerbated fears that more pain and restructuring may lie ahead for the financial sector,” analysts at Charles Schwab & Co said in a report.
“It may take quite a bit more policy force to break the back of the recession” that has gripped the US for the past year, economists at IHS Global Insight wrote.
The US government is scheduled to release in the coming week a preliminary GDP projection for the fourth quarter of last year — the second update on economic activity for the quarter. Most economists surveyed expect that GDP in the quarter fell 5.4 percent, subsequent to receiving revisions to data after the first reading of negative 3.8 percent.
The GDP decline “is expected to be more severe than previously reported,” IHS Global Insight said.
Other fresh data to be released next week “will not do much to allay” concerns over the economy, it said. Among others, consumer confidence measures for this month as a whole are expected to sink and total new and existing home sales are expected to have declined last month, the market analysis firm said.