Last updated: November 22, 2010 6:51 pm

Wall Street losses led by financials

The financial sector led US stocks lower as the Irish bail-out spread fears of further problems for European banks.

The S&P 500 was down 0.6 per cent to 1,192.90 by midday, while the Dow Jones Industrial Average had lost 0.7 per cent to 11,121.63. But the Nasdaq Composite was a fraction higher at 2,519.23.

The S&P 500 financials index fell 1.4 per cent and Morgan Stanley was lower by 3.1 per cent to $24.83, JPMorgan Chase was down 1.9 per cent to $38.66 and Goldman Sachs fell 3.2 per cent to $161.30.

US-listed shares in Irish banks, which have fallen sharply in recent weeks, tumbled with Allied Irish Bank losing 5.7 per cent to $1.16 and Bank of Ireland sinking 16.9 per cent to $2.22.

A decision by eurozone finance ministers, along with the UK and Sweden, to bail out Ireland with an €80bn-€90bn package, failed to calm investors, who began to worry about the possibility of contagion. Stephen Lewis, chief economist at Monument Securities, said the banking sector had been the primary problem for Ireland so there would now be renewed concern across Europe about bank funding.

“No Irish bank failed the EU’s stress tests, results of which were published in July,” he said. “Clearly, the methodology employed in those tests was not adequate to give early warning of potential trouble.

“The fear will be that, if the stress tests failed to identify the flaws in Ireland’s banking system, what other problems might there be that went undetected during the EU’s exercise? Whatever reassurance the stress tests afforded when their results were published has been forfeited.”

Financial stocks were also hit by two other reports. A BarCap study said that the top 35 US banks will be short of between $100bn and $150bn in equity capital when the new Basel III global bank regulations are implemented and it was also reported that federal authorities may file a series of insider trading cases against hedge fund traders, consultants and Wall Street bankers.

But Amazon and Apple climbed, helping the Nasdaq into positive territory. Amazon said it had developed an application for Apple’s iPhone which allowed shoppers to compare the prices of goods in stores with those on its websites. Amazon rose 2.1 per cent to $168.26 and Apple gained 0.9 per cent to $309.44.

In deal news, Novell jumped 6.5 per cent to $5.96 after Attachmate, an investment group, agreed to buy the software maker for $2.2bn. The price of $6.10 per share is at a 9.1 per cent premium to the share’s closing price on Friday. The software maker had rejected a $2bn offer by Elliott Associates made in March. Novell will also sell some intellectual property assets to a group of technology companies led by Microsoft for $450m. Shares in Microsoft slid 0.4 per cent to $25.59.

Boeing fell 0.7 per cent to $63.16, less than the wider industrials index, after it said it could acquire privately owned Summit Aeronautics. The deal to buy the company, which supplies titanium and other hard metal structures for aircraft, was for an undisclosed sum.

Takeover battles for Dynegy and Genzyme rumbled on. Dynegy fell 2 per cent to $5.01 after Blackstone Group , which has bid for the energy company, said it considers its offer to be fair and is not prepared to raise it again. Blackstone edged up 0.5 per cent to $13.31.

Genzyme added 0.7 per cent to $71.78 after it was reported that the pharmaceutical company was considering a new deal structure with French company Sanofi-Aventis. The two companies have been in an acquisition battle since the summer. US-listed shares in Sanofi-Aventis fell 1.6 per cent to $33.58.

As the earnings season drew to a close Tyson Foods was one of the last companies to report. The food producer gained 4.1 per cent to $16.29 after its gross margins jumped. Earnings beat expectations but sales were lower than forecast as volumes fell across all of the meat company’s businesses.

Hewlett-Packard nudged up 0.6 per cent to $42.75 ahead of its earnings due to be released after the closing bell.

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