US stocks plunged yesterday as Barack Obama was taking office as the new US President. There was little new information in the inauguration speech as to how the new administration would address the faltering economy, disappointing investors. Dire news from the banking sector continued, this time from the world's largest institutional money manager, State Street Corporation.
The Dow Jones tumbled 332.13 points to close at 7,949.09, the S&P 500 dropped 44.9 points to end at 805.22. The Nasdaq slid 88.47 points to finish at 1,440.86.
State Street, which has been considered one of the safest bets in the banking sector warned yesterday that fourth quarter earnings slumped 71%. Furthermore, it also said it has a $6.3 billion unrealised loss in its investment portfolio. Shares plummeted 59% as a result while a number of other large bank shares fell in sympathy, including Bank of America, off 29%, Citigroup, down 20% and JPMorgan Chase which ended 20.7% lower. In contrast, after the closing bell Citigroup climbed 3% after declaring a 1 cent dividend and announcing that it had completed the sale of Citigroup Technology Services Ltd (India) for $127 million.
IBM fell 3.5% in normal trade ahead of its quarterly results which were expected after the close. When they reported their results investors were pleased, with earnings that rose from a year ago, topping estimates - sending shares 4.5% higher. In normal hours, both Microsoft and Apple had fallen ahead of quarterly results expected later in the week. Microsoft lost 6.2% while Apple shed 4%. Intel declined 6.4% after cutting the price of some of its processors by 48%.
US light crude oil for February delivery gained $2.23 to $38.74 a barrel. COMEX gold for February delivery added $15.30 to $855.20 an ounce. Treasury prices slumped, raising the yield on the 10 year note to 2.37% from 2.2%.
The Nikkei dropped 164.15 points to close at 7,901.64 this morning as investors worried that a prolonged economic slump will erode capital at banks and cash flows at manufacturers. Sumitomo Mitsui Financial Group, Japan's third largest listed bank, dropped 5.4% as speculation global banks need to bolster capital sent US financial shares to an almost 14 year low.
The Hang Seng fell 376.14 points to close at 12,583.63 as the earnings outlook for manufacturing companies weakened. Angang Steel, China's second biggest maker of the alloy, lost more than 7% after saying profit dropped by half last year.
The FTSE 100 is currently 40.16 points lower 4,051.24. Banks top the fallers and risers board, Barclays leads the fallers, down 25% and Lloyds loses 17%. Royal Bank of Scotland tops the risers, up 6.8%, as the Treasury Committee urged the government to nationalise the bank, which it already owns 70% of.