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Wall Street slides as banks eclipse housing optimism

US stocks fell yesterday as persistent worries about banks eclipsed news the government would announce a plan next week to prop up the housing sector by helping homeowners avoid foreclosures.

Initial enthusiasm over the prospect of relief on the housing front proved to be short-lived after the White House cautioned against unreasonable expectations and doubts lingered about how banks will cleanse their books of toxic assets.

The Dow yesterday had its lowest close since the bear market closing low of Nov. 20, capping a week when financial stocks were repeatedly pummeled as the government's latest bank rescue plan failed to allay investor worries.

Shares of JPMorgan shed 3.3 percent to US$25.30 yesterday, making the stock one of the top drags on the Dow. The KBW Bank index fell 5.3 percent and ended down 14 percent for the week.

"The banks are still a concern, plus we have a long weekend coming up," said Peter Jankovskis, director of research at OakBrook Investments LLC in Lisle, Illinois. "There are people that may be deciding they want to be out of the market for a few days.

The market will be closed on Monday for the Presidents Day holiday.

The Dow Jones industrial average fell 82.35 points, or 1.04 percent, to 7,850.41. The Standard & Poor's 500 Index dropped 8.35 points, or 1.00 percent, to 826.84. The Nasdaq Composite Index shed 7.35 points, or 0.48 percent, to 1,534.36.

Only three of the Dow's 30 components finished higher.

The close for the Dow marked its worst showing since the Nov. 20 bear-market closing low and the index is now off 10.6 percent year-to-date after sliding 5.2 percent for the week.

For the week, the S&P 500 was down 4.8 percent for its worst weekly showing since the bear market low of late November.

Britain's Lloyds Banking Group stoked banking sector concerns after it said its HBOS unit had a pretax loss of 8.5 billion pounds (US$12.3 billion) for 2008, driven by 7 billion pounds loans, raising fears that the already partly nationalized bank will need further state help.

Some big manufacturers, however, moved higher, on expectations they will benefit from the US$787 billion economic stimulus plan that the US Congress is expected to approve later yesterday.

Planemaker Boeing climbed 1.6 percent to US$40.48, while United Technologies, the world's largest manufacturer of elevators and air conditioners, added 0.4 percent to US$47.09.

Consumer stocks dropped on skepticism whether consumers will rush to spend the tax cuts that are part of the US$787 billion stimulus package; the US House of Representatives approved the package yesterday afternoon and the Senate was due to vote on the bill starting at 5:30 pm (2230 GMT).

US consumer confidence in February fell to its lowest level in three months as sentiment grew increasingly gloomy over an economic downturn that most expected to last more than five years, a survey showed yesterday.

Wal-Mart Stores Inc shares fell 3.3 percent to US$46.53, making it the top drag in the Dow. Home Depot dropped 3.5 percent to US$21.22. The S&P Retail index slid 2.1 percent.

The Nasdaq was weighed down by a 3.8 percent decline in Research in Motion after Credit Suisse cut its rating on the stock to "underperform" from "neutral" as it forecast lower average selling prices for the BlackBerry.

The index fell 3.6 percent for the week.

Volume was light on the New York Stock Exchange, where about 1.24 billion shares changed hands, below last year's estimated daily average volume of 1.49 billion shares. On the Nasdaq, about 2 billion shares traded, also below last year's daily average of 2.28 billion.

Decliners outnumbered advancers on the NYSE by a ratio of about 3 to 2, while on the Nasdaq, the ratio was about five to four.


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