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wallstreet: Stocks dip for third straight week on news of belt-tightening

NEW YORK – US STOCKS fell sharply on Friday, capping a third consecutive weekly decline, on a warning by American Express Co of mounting credit-card defaults and a slowdown in consumer spending.

Worries about consumer belt-tightening hit stocks – from fast-food chain McDonald’s Corp to Tiffany & Co, which cut its profit forecast on weak consumer spending.

Evidence that individuals reined in their usual holiday spending last year came from SpendingPulse, a private retail data service, which said spending, excluding sales of petrol and cars, fell 0.7 per cent last month.

‘Consumers were not expected to spend much and they spent even less than that,’ said Mr Fred Dickson, director of retail research at D.A. Davidson & Co in Lake Oswego. ‘The markets right now are very much in recession mentality.’

The Dow Jones Industrial Average ended down 246.79 points, or 1.92 per cent, at 12,606.3. The Standard & Poor’s 500 Index fell 19.31 points, or 1.36 per cent, to 1,401.02. The Nasdaq Composite Index dropped 48.58 points, or 1.95 per cent, to 2,439.94.

The S&P 500’s year-to-date decline of 4.59 per cent makes it the fourth-worst start to any year in the history of the benchmark, according to Mr Howard Silverblatt, senior index analyst at Standard & Poor’s.

For the week, the Dow shed 1.5 per cent, the S&P lost 0.8 per cent and the Nasdaq declined 2.6 per cent.

American Express shares dropped more than 10 per cent to US$44 after the credit card company gave a profit warning. It was the steepest plunge in the company’s shares since the first day the stock markets reopened following the Sept 11 terror attacks.

Also on Friday, Bank of America Corp said it would buy battered mortgage lender Countrywide Financial Corp for US$4 billion (S$5.7 billion) in stock in a transaction that could help avert one of the biggest collapses arising from the US housing crisis.

Moody’s Investors Service said it may cut Bank of America’s credit rating.

Elsewhere in the financial sector, AllianceBernstein Holding shares dropped nearly 10 per cent to US$69.70 after the money manager said it sees lower 2007 earnings per share, partly due to lower hedge fund fees.

 

Source: Reuters (The Sunday Times 13 Jan 08)

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