Midday Market Update: Financials Lead the Decline

By , Money Morning •

By Jennifer Yousfi
Managing Editor

Banking shares slumped, taking the rest of the market with them, after another analyst reduced first-quarter profit expectations for financial firms.

At noon ET today (Thursday), the three major U.S. stock indices had all posted losses. The blue-chip Dow Jones Industrial Average Index had a decline of 111.69 points (-0.91%), to trade at 12,143.30. The tech-laden Nasdaq Composite Index slumped 16.05 points (-0.71%), to reach 2,256.76. And the broader Standard & Poor's 500 Index had a slip of 15.45 points (-1.16%), to settle at 1,318.25.

"It seems like there is no end to issues within the financial sector; it is the inability to stem the flow of negative news in terms of re-evaluating capital. ... We're that much closer to zero now," Owen Fitzpatrick, head of U.S. equity group at Deutsche Bank AG (DB), told MarketWatch.

The financial (-1.72%) and transportation (-1.53%) sectors had the biggest declines. The only sector to post a gain at midday was the basic materials sector, up a scant 0.09%.

"It's a tough environment," Paul Rasplicka, who manages $4 billion at AIM Investments (IVZ), said in a Bloomberg Television interview in New York. "Lending terms are tighter. The willingness to extend credit is less. It's making it very tough for business."

Keefe, Bruyette & Woods Inc. analyst Lauren Smith lowered earnings expectations for several large Wall St. firms sending shares of Citigroup Inc. (C), Merrill Lynch & Co. Inc. (MER) and Goldman Sachs Group Inc. (GS) lower.

In overseas markets, Japan's Nikkei Index had a 243.36-point gain to reach 13,215.42. Hong Kong's blue-chip Hang Seng Index increased 228.39 points to close at 23,342.39.

In Europe, the European Central Bank held interest rates steady to combat inflation, sending the major indices down again after a brief respite yesterday (Wednesday). The Paris-based CAC40, London's FTSE 100, Madrid's IBEX 35 and the Frankfurt-based DAX all posted declines.

At midday, the dollar had lost ground against the euro [down 0.586%], the yen [down .684%] and the pound sterling [down 0.911%].

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