Midday Market Update: Stocks Slump on Financial Fears

By Jennifer Yousfi
Managing Editor

U.S. shares declined as poor earnings from two banks led investors to believe financial firms have yet to recover from the subprime mortgage crisis.

At midday in New York, the blue-chip Dow Jones Industrial Average Index was down 77.02 points (-0.60%), to trade at 12,772.34. The tech-laden Nasdaq Composite Index shed 5.89 points (-0.25%), to reach 2,397.08. And the broader Standard & Poor's 500 Index decreased 8.67 points (-0.62%), to hit 1,381.66.

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Most sectors were down, with the consumer cyclical sector (up 0.51%) and the energy sector (up 0.70%) posting the only gains. The transportation sector (down 1.01%) and the financial sector (down 0.97%) had the largest declines.

"Every quarter they predict the worst is behind us, we've taken the writeoffs, it's all rosy from here," Whitney Tilson, founder of New York-based hedge fund manager T2 Partners LLC, which oversees about $100 million, said in a Bloomberg Television interview. "Every quarter they've been wrong. I think they are again here."

Bank of America Corp. (BAC) announced a 77% decline in first-quarter earnings to $1.21 billion or 23 cents per share. Shares were down over 2% at midday.

Ohio-based National City Corp. (NCC) stock plunged over 25% after a report appeared in The Wall Street Journal that the bank needs to raise $7 billion in capital to bolster liquidity reserves and reduce its dividend to just 1 cent per share.

In overseas markets earlier today, Japan's Nikkei 225 Index gained 1.6% to hit its highest close in two months with an increase of 220.10 points to close at 13,696.55. Hong Kong's blue-chip Hang Seng Index rose over 2% with a 523.89-point drop, to 24,721.67, an 11-week closing high.

European bourses were down, with the Paris-based CAC40, London's FTSE 100, Madrid's IBEX 35 and the Frankfurt-based DAX all posting losses.

At midday, the dollar had lost ground against the euro (down 0.792%) and the yen (down 0.569%), but gained ground against the pound sterling (up 0.570%).

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