The biggest round of US job cuts for 15 years helped push Wall Street stocks lower on Monday as fears heightened over the scale of the difficulties facing financial institutions.
Financials were among the biggest losers, down 6 per cent overall. Citigroup shed 6.6 per cent to $8.89 after unveiling plans to cut 52,000 jobs, which, according to consultants Challenger Gray & Christmas, was the biggest job cut announcement since the 60,000 by IBM in 1993.
The bleak news, coupled with mounting signs of global recession, overshadowed any developments at the G20 meeting.
Still, the market pared early losses as investors hunted for bargains in the energy, material and industrial sectors and briefly entered positive territory.
Jeffrey Kleintop, strategist at LPL Financial, said there was a “tug of war” between poor economic developments and some signs of improvement in credit markets.
The benchmark S&P 500 index finished down 2.6 per cent at 850.75 points after a sharp sell-off into the close, near the session’s lows. The Dow Jones Industrial Average was down 2.6 per cent at 8,273.58 points and the Nasdaq Composite Index 2.3 per cent at 1,482.05.
The Chicago Board Options Exchange Volatility Index, known as Wall Street’s fear gauge, edged 4.2 per cent higher to 69.10, which continued to indicate elevated signs of distress.
Elsewhere in financials, Bank of America slid 8.5 per cent to $15.03 after the group said it would increase its stake in China Construction Bank from 10.75 per cent to 19.1 per cent.
Investors brushed aside a better-than-expected reading on industrial production – output rose 1.3 per cent last month, according to the Federal Reserve – as downward revisions to prior figures offset the rare positive news.
RDQ Economics said the data were in any case primarily a result of “post-hurricane rebounds” and Bank of New York Mellon called the increase a “dead-cat bounce”.
Official confirmation that the Japanese economy had entered recession increased concerns that the global downturn was spreading.
Construction groups came under pressure after separate data from the Federal Reserve Bank of New York showed manufacturing in New York contracted in November at the fastest pace since records began in 2001. Caterpillar lost 3.4 per cent to $35.70.
General Motors jumped 5.7 per cent to $3.18 on mounting hopes Washington would grant aid to the car industry, although Ford eased 4.4 per cent to $1.72.
In earnings news, Lowe’s and Target became the latest retailers to disclose sharp falls in third-quarter profit.
Yet the figures were not quite as dire as analysts feared and shares in the former rose 4.2 per cent to $18.99.
Target lost 4.1 per cent to $31.68 after management warned that the discounter’s gross margin performance might not be repeated in the fourth quarter.
Also in the consumer sector, McDonald’s edged 0.9 per cent lower to $55.61 even after UBS upgraded its recommendation on the fast food group from “neutral” to “buy”. The bank said it was encouraged by the group’s “ongoing strong global trends amid a deteriorating global consumer environment”.
In technology, Dell fell 3.4 per cent to $10.52 after Merrill Lynch downgraded its recommendation on the computer maker from “buy” to “neutral” ahead of results due this week, owing to lower than expected demand.
Walt Disney lost 6.4 per cent to $19.74 after Soleil Securities cut its recommendation on the theme-park operator and media group from “buy” to “hold”.
United Parcel Service was up 0.3 per cent at $53.28 even after the delivery group declined to forecast its peak day for holiday shipping, breaking with a long-standing practice in the industry. An uncertain economy made prediction too difficult, it said.
Alcohol, tobacco and casino stocks received a boost after Merrill Lynch issued a bullish outlook on the so-called vice sectors.
“Consumers do not kick their habits in tough economic times,” said Merrill.
Still, brewer Molson Coors shed 2 per cent to $41.71.
Energy was one of several sectors to find positive territory earlier in the session, but finished down 1.6 per cent overall as crude oil settled just above $55 a barrel.