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Further signs of difficulties facing companies in a range of sectors conspired with lower commodity prices on Tuesday to push US stocks sharply lower for a second successive session. Materials was the worst-performing sector, down 4.2 per cent, on fears over the health of the global economy.
Alcoa became the latest aluminium producer to cut production, with plans for a reduction of 350,000 tonnes a year. Its shares lost 7.1 per cent to $10.94.
“More cuts might be needed,” said Friedman, Billings, Ramsay, which halved its price target on the stock to $10 and cut its recommendation to “market perform”.
The energy sector was also a big loser as crude oil slid below $60.
The benchmark S&P 500 index closed down 2.2 per cent at 898.95 points after volatile, Veterans Day thinned trading, as once again the commodity price declines afforded other sectors scant relief.
Down as much as 3.7 per cent, the market pared losses in afternoon trading and the financial sector briefly entered positive territory after regulators unveiled plans to limit home foreclosures through Fannie Mae and Freddie Mac.
Still, the sell-off left the S&P 500 only 50 points away from the five-year low the market hit two weeks ago.
The Dow Jones Industrial Average fell 2 per cent lower to 8,693.96 points and the Nasdaq Composite Index lost 2.2 per cent to 1,580.90 points.
In financials, which stood 2.4 per cent lower by the close, American Express fell 6.6 per cent to $22.40 even though analysts broadly welcomed the credit card group’s move to become a bank holding company, which could cut its borrowing costs.
“Funding . . . was not our primary concern,” wrote Oppenheimer analysts in a note. “Consumer credit losses have been.”
Goldman Sachs gained 4.9 per cent to $74.68 after a sharp fall in the previous session. The recovery came even though analysts at Fox-Pitt Kelton joined several others in forecasting a fourth-quarter loss for the bank.
American International Group, which jumped 8.1 per cent in the previous session after the Federal Reserve unveiled a revised $150bn rescue plan for the ailing insurer, edged 0.9 per cent lower to $2.26.
Alan Ruskin, of RBS Global Banking & Markets, said: “I see no reason why the financial sector should foresee anything better than a protracted rounded bottom or u-shaped recovery when it comes, and that won’t happen before [the second half of] 2009 at the very earliest.”
Citigroup slid 3.7 per cent to $10.80 after the bank unveiled plans to rework $20bn of mortgages.
Stock in General Motors, which was already at levels not touched since the 1940s, slid 13.1 per cent to $2.92 on heightened fears for the future of the carmaker. Ford lost 6.7 per cent to $1.80.
Their declines came even after Nancy Pelosi, house speaker, backed an emergency rescue plan for the ailing industry.
A profit warning from Tyco, down 11.7 per cent to $14.13, pushed the industrials sector lower. The lowered guidance came in spite of better than expected fourth-quarter earnings.
Defensive areas once again held up relatively well and consumer staples outperformed the market, down 1.5 per cent. Procter & Gamble did better than most, falling 1.7 per cent lower to $63.82 after the group raised its outlook.
Technology was 2.1 per cent lower overall. Hardware came under particular pressure after Barclays Capital issued a bearish outlook on the sector, “given continued deterioration in spending from corporations and consumers into year-end, weakness in the PC supply chain and the potential for inventory builds”.
Hewlett-Packard and Dell shed 2.7 per cent to $33.25 and 4.5 per cent to $11.33, respectively, after Barclays cut revenue estimates on the companies for the second time in a month.
Google hit a fresh low for the year, down 2.3 per cent to $311.46, after Goldman Sachs downgraded its revenue forecast on the search group. “Revenue should react rapidly to macro deterioration,” the bank said.
Consumer discretionaries came under pressure as Starbucks fell 2.1 per cent to $9.99 after the coffee chain reported a fall in comparable fourth-quarter US sales.
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