U.S. Stock Losses Mount As Financial-sector Shakeups Take Toll
NEW YORK (MarketWatch) -- U.S. stocks on Monday slumped for the first time in five sessions as upheavals at Wachovia Corp. and Washington Mutual Inc. revived worries about continuing credit losses in the financial sector.
"Concerns in the financial sector have been in the spotlight, following trouble at the U.K. lender Bradford & Bingley, while management shake-ups at Wachovia and Washington Mutual have unsettled the markets as well," said analysts at Action Economics.
The Dow Jones Industrial Average fell 137.19 points to 12,501.13, with all but one of its 30 components sinking in the early going, with the financial sector among those declining.
Economic data proved less worrisome than feared, but had little impact on the slide among the broad stock indexes, with the Institute of Supply Management's index of manufacturing activity rising to 49.6 in May from 48.6 in April. .
And, the government reported U.S. construction spending fell 0.4% in April following a revised 0.6% drop in March.
The S&P 500 declined 14.75 points to 1,385.63, while the Nasdaq Composite shed 29.63 points to 2,493.03.
Government bonds gained, with the 10-year note yield falling 4 basis points to 4.03% to price at 98 25/32.
The dollar was mixed against major currency rivals and the price of gold climbed.
U.S. stocks finished with gains last week as oil prices dropped from highs of $135 a barrel.
"Hardly an inspiring rally given the huge decline in oil prices, but a four-day rally is nothing to sneeze at," said Paul Nolte, director of investments at Hinsdale Associates.
On Monday, oil futures dropped 50 cents to $126.85 a barrel. Treasury Secretary Henry Paulson said speculators played a minor role in oil's rise. He said the United States would remain open to foreign investment.
Shares of Wachovia Corp. fell 4.2% after the nation's forth-largest bank dismissed CEO Ken Thompson, citing a series of "disappointments."
Washington Mutual Inc. , the nation's largest thrift, answered criticism of its corporate governance and financial hemorrhaging by splitting the office of chairman and CEO and by adopting a majority-voting standard for its directors. Its shares were recently down 1.3%. .
Also weighing on financial stocks, British lender Bradford & Bingley Plc warned on profit and said it would raise less from selling discounted shares than it previously set out. The lender also announced the departure of its chief executive and said TPG Capital will become a major shareholder.
As first-quarter earnings season winds down, analysis by Thomson Reuters shows companies in the financial sector missed earnings estimates by 39% on average.
Data released at an industry conference showed ImClone Systems Inc.'s Erbitux drug doesn't get a response in some colorectal cancer patients with a gene mutation and that adding it to Genentech Inc.'s Avastin also doesn't help colorectal cancer patients.
Genentech said Avastin can help stop the progression of breast cancer when used with chemotherapy. Acorda Therapeutics shares climbed nearly 30% after a positive Phase III trial of a multiple sclerosis drug.
Harris Corp. dropped 10.6% in early trade as The Wall Street Journal quoted the company's CEO as saying Harris is not seeking a merger or a sale.
Overseas, Japan's Nikkei 225 ended with a 0.7% rise, while Britain's FTSE 100 dropped 0.8%.
By Kate Gibson