Stocks drop, banks worry, FedEx warns
NEW YORK » Wall Street took a tumble yesterday on renewed concerns about the financial sector and FedEx Corp.
's warning that weakening demand and surging fuel costs would weigh on profits in the coming year.
The Dow Jones industrial average finished down more than 130 points, after briefly dipping below the 12,000 mark for the first time since mid-March. All three major stock indexes finished down about 1 percent, as oil and bond prices jumped.
Unease about financials arose after several worrisome developments. Fifth Third Bancorp said it plans to cut its dividend by nearly two-thirds, raise $1 billion through an offering of preferred stock and generate another $1 billion through the sale of businesses. Fifth Third, a regional bank, fell $3.47, or 27 percent, to $9.26.
MF Global Ltd. predicted that tight credit spreads will weigh on its fiscal first-quarter earnings. The futures and options broker said it plans to sell $300 million in convertible securities to help pay down a loan due this year. MF Global fell $5.43, or 41 percent, to $7.83.
And although Morgan Stanley reported a slightly better-than-expected fiscal second-quarter profit, earnings at the nation's second-largest investment bank were still down 61 percent from a year earlier on declining revenue. Morgan Stanley rose 10 cents to $40.69.
Earlier, FedEx forecast that earnings for the fiscal year that began this month will fall well short of what Wall Street had been expecting. The shipper's prediction serves as the latest sign that oil prices, which have nearly doubled in the past year, are exacting a burdensome tax on businesses and consumers alike. The stock fell $1.73, or 2 percent, to $82.60.
"I think the news out of FedEx today really is starting to make people second guess some of the optimism that had been brewing over the last few weeks," said Craig Peckham, market strategist at Jefferies & Co. in New York.
The Dow fell 131.24, or 1.08 percent, to 12,029.06. The index briefly fell below 12,000 before recovering. The index hadn't traded below the 12,000 mark since March 18 and last closed below that level on March 17.
The Dow's decline follows its loss of more than 100 points on Tuesday.
Broader stock indicators also pulled back yesterday. The Standard & Poor's 500 index fell 13.12, or 0.97 percent, to 1,337.81, and the Nasdaq composite index fell 28.02, or 1.14 percent, to 2,429.71.
Declining issues outnumbered advancers by nearly 3 to 1 on the New York Stock Exchange, where volume came to 1.28 billion shares.
The Russell 2000 index of smaller companies fell 5.86, or 0.80 percent, to 730.71.
Light, sweet crude rose $2.67 to $136.68 a barrel on the New York Mercantile Exchange after the Energy Department said the nation's crude oil stockpiles fell less than expected last week but that gasoline supplies declined. Though often volatile, the weekly numbers have drawn increased attention in recent months as investors look for any clues about where energy prices are headed.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.14 percent from 4.20 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.