US stocks declined on Monday as quarterly results from Bank of America Corp and National City Corp fuelled worry about banks' profitability. Shares of Bank of America, the No 2 US bank, fell 2.8 percent after it posted a 77 percent tumble in first-quarter profit.
While shares of National City, a large US Midwest regional bank, slid more than 25 percent after it posted a quarterly loss, slashed its dividend and said it will raise new capital. Shares of National City sank 27.3 percent to $6.06. The bank said it is raising $7 billion by selling shares as it wrestled with the impact of the housing market downturn.
"The market started out with a negative tone on Bank of America earnings, and also National City, with a growing concern that banks are doing deals that favour large shareholders," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.
Investors also worried that banks could be in for a prolonged period of dreary earnings as fallout from the housing slump and credit market turmoil takes its toll and concerns persist about the economy's health.
The Dow Jones industrial average was down 79.63 points, or 0.62 percent, at 12,769.73. The Standard & Poor's 500 Index was down 7.95 points, or 0.57 percent, at 1,382.38. The Nasdaq Composite Index was down 6.44 points, or 0.27 percent, at 2,396.53.
The market snapped a four-day winning streak, with the S&P financial index, down 2 percent, also on track to snap a four-day streak of gains. Bank of America Chief Executive Kenneth Lewis said credit market problems were not over and the effects of the housing slump may take at least the rest of 2008 to work out.
Bank of America shares fell $1.06 to $37.50 on the New York Stock Exchange, putting the stock among the top Dow drags and the biggest loser on the S&P 500. Its profit fell 77 percent amid write-downs and rising credit losses.
Shares of Citigroup Inc dropped 1.5 percent to $24.73 on the NYSE after Meredith Whitney, an influential bank analyst at Oppenheimer & Co, forecast a wider 2008 loss for the largest US bank.
On Friday, Citigroup reported a $5.11 billion first-quarter loss. Yet its stock rose with the rest of the market, which rallied and gave the Dow its best week since February.
On the Nasdaq, shares of Sears Holdings Corp slumped 5 percent to $99.52 after the retailer announced late Friday it had been advised that its secured credit facility with Bank of America will end in July. But Nasdaq losses were limited by gains in Apple Inc after Citigroup increased its quarterly forecast for the company. The iPod maker's stock rose 2.2 percent to $164.65. Apple is expected to report results on Wednesday.
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