Stocks Drop Again as Bank Worries Persist

NEW YORK  — News that Bank of America Corp. needs another government cash infusion sent stocks sliding Thursday as investors feared that the banking crisis of last fall may have returned.

Investors dumped bank stocks, which led the market lower. The major stock indexes fell more than 2 percent, including the Dow Jones industrial average, which lost 200 points and fell below 8,000 for the first time since Nov. 21. The Dow was down for the seventh straight session.

In mIn midday trading, the Dow fell 203.42, 2.48 percent, to 7,996.72.

The federal government is considering a fresh multibillion-dollar aid package for Bank of America to help it absorb losses at Merrill Lynch, according to a person with knowledge of the discussions, who spoke to The Associated Press on condition of anonymity because of the sensitive nature of the discussions. The person said the new aid package could be modeled along the lines of the financial lifeline that was thrown to Citigroup Inc. in November.

Other media organizations have had similar reports of a potential aid package for the company.

The news, which comes amid expectations that Citigroup will be announcing a further streamlining because of its ongoing problems, has Wall Street worried that banks that received billions of dollars in government bailout money are still having trouble and will need more help.

"People seem to be fearing the financials again, fearing that they are going to need more funding," said Uri Landesman, head of global growth strategies at ING Investment Management.

JPMorgan fell 29 cents, or 1 percent, to $25.62 after its report, which was tempered by a discouraging outlook. The huge banking company managed to avoid a loss, reporting earnings of $702 million in the October-December quarter. Analysts had predicted the company would break even.

Still, Chief Executive Jamie Dimon called the quarter "very disappointing." The bank said it increased its reserves to cover potential loan losses by $4.1 billion. Increased losses from bad loans are likely if the economy deteriorates, which is a "distinct possibility," Dimon said.

JPMorgan is the first big U.S. bank to release fourth-quarter earnings, and analysts and investors are looking at it for signs of how the rest of the industry may be faring. The bank, which bought failing Bear Stearns Cos. and Washington Mutual Inc. last year, is viewed as one of the stronger players in the industry, so results from other big banks could prove worse.

Richard Sparks, senior equities analyst at Schaeffer's Investment Research, said investors are alarmed by the troubles still facing banks.

"The whole concern that we've had all along had been whether the steps taken by the government would be enough or would be effective, and I think that now is becoming a widespread worry on the Street," he said.

"If they pulled out all the stops, is there a way to save them?" Sparks said, referring to the government.

Wall Street is concerned about the financial industry but is also looking at other parts of the economy.

Investors are awaiting quarterly results due after the closing bell Thursday from Intel Corp. The world's largest maker of computer chips has already warned investors that its fourth-quarter revenue will fall short of its initial estimates. The market is hoping to gain some sense of the company's outlook for the current year. Intel fell 30 cents, or 2.3 percent, to $12.78.

Apple Inc. fell $4.16, or 4.9 percent, to $81.17 after the company said after the end of trading Wednesday that Chief Executive Steve Jobs would go on medical leave until June. The announcement came a week after the Apple co-founder insisted he would stay with the company.

Copyright AP - Associated Press
Contact Us