US stocks fell on Monday after American Express Co said the number of people struggling to make credit card payments grew, erasing earlier optimism that banks could return to profit in the downturn. It was Wall Streets first decline after a four-day winning streak.
The Nasdaq fell nearly 2 percent as investors booked profits in semiconductor stocks following a strong week. An index of semiconductor shares fell 3.6 percent, following a 13 percent rise last week. American Express, which caters to wealthier consumers that are viewed as more credit worthy, said its credit card default rates rose to 8.7 percent in February.
Shares of American Express lost 3.3 percent to $12.66. "American Express took the legs out from under us," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. "When they came out that the default rates were higher in the last quarter, that accelerated the selling," he added.
Intel also put pressure on the Nasdaq after the company accused Advanced Micro Devices of breaching the terms of a cross-licensing agreement between the rival chip makers. The Dow Jones industrial average shed 7.01 points, or 0.10 percent, to 7,216.97. The Standard & Poors 500 Index declined 2.66 points, or 0.35 percent, to 753.89.
The Nasdaq Composite Index lost 27.48 points, or 1.92 percent, to 1,404.02. The declines put the brakes on last weeks four-day rally. Even after the recent advance, the S&P 500 is down 16.5 percent in 2009 and off more than 50 percent from highs reached in October 2007.
Shares of Alcoa Inc slid 10.1 percent to $5.50 in extended trading after the company said after the bell that it will cut its dividend, issue stock and convertible notes and trim its 2010 spending in an effort to weather a downturn in demand for aluminium.
Banks had earlier pushed indexes higher after British bank Barclays Plc said it had a "strong start" to 2009.
The bank also confirmed it had discussed selling its iShares unit, in a move that could help it avoid giving a stake to the British government. The comments echoed those made last week by Bank of America Corp, J.P. Morgan Chase & Co and Citigroup Inc. Citi shares jumped 31 percent to $2.33, off a session high of $2.68. Earlier, Citis stock had shot up as much as 50.6 percent.
The S&P financial index reversed earlier gains to end down 1.9 percent. Analysts also noted that despite the positive comments from banks, questions over what measures the US government will take to shore up the financial system still weigh on investors.
"While weve had a significant rally, I think theres still too many questions that need to be answered for people to feel comfortable piling into the market even here," said Michael James, senior trader at regional investment bank Wedbush Morgan, in Los Angeles. Among Nasdaq stocks, shares of Intel fell 3.1 percent to $14.25.
AMD, which denied Intels charge that it had breached a cross-licensing agreement, dropped 1.6 percent to $2.48 on the New York Stock Exchange. Comments from Federal Reserve Chairman Ben Bernanke helped improve investor sentiment after he said during an interview on the CBS program "60 Minutes" on Sunday that the US recession could probably come to an end this year and "well see recovery beginning next year."
Financial stocks were also helped by news that the Financial Accounting Standards Board, which sets US accounting rules, proposed to allow more leeway on mark-to-market accounting rules. Mark-to-market accounting has forced financial institutions to write down billions of dollars in assets. In economic news, a report showed that a gauge of New York State manufacturing activity hit a record low in March.
Trading was active on the New York Stock Exchange, with about 1.9 billion shares changing hands, above last years estimated daily average of 1.49 billion, while on Nasdaq, about 2.15 billion shares traded, below last years daily average of 2.28 billion. Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 3 to 2. On the Nasdaq, declining stocks prevailed, with about five stocks falling for every four that rose.