Stocks tumble again as bank worries grow

Stocks tumble again as bank worries grow

Analysts are starting to realize that the end of the financial meltdown is far off.

NEW YORK (AP) — Volatility is reasserting itself in the stock market.

A darkening outlook for companies from banks to retailers to energy producers pummeled Wall Street on Wednesday, sending the Dow Jones industrials down nearly 250 points, or 2.94 percent, and giving the other major indexes a loss of 3 percent.

The plunge leaves the Dow and the broader Standard & Poor’s 500 index down more than 9 percent in six sessions. The S&P 500, the gauge tracked by professional investors, has given up half its gains since it closed at an 11-year low Nov. 20.

One of the catalysts behind the market’s latest bout of turbulence Wednesday was the Commerce Department’s December retail sales report. Wall Street knew retailers’ cash registers weren’t as busy this holiday season but the report was much worse than anticipated. The department said retail sales dropped 2.7 percent last month, more than double the 1.2 percent decline analysts forecast.

The record sixth straight month of declines is only the latest symptom of the economy’s ills. Consumers hit by steep drops in home prices, rising unemployment and difficulty accessing credit have no choice but to pull back. That’s troubling for Wall Street because consumer spending makes up more than two-thirds of U.S. economic activity. Many analysts predict the year-old recession, already the longest in a quarter-century, will persist at least until late this year.

“No doubt the retail sales numbers that came in just reminded us how bad the fourth quarter is going to look,” said Jim Dunigan, managing executive of investments at PNC Wealth Management.

The confluence of bad news and fears about extremely weak fourth-quarter earnings has sent stocks plunging this month. Wall Street had rallied during December and at the start of the year on hopes for an improving economy, but companies’ earnings and outlooks and the continuing stream of weak economic data have brought pessimism back to the market.

Analysts expect investors to refrain from buying until they have a better picture of companies’ forecasts for 2009, which so far aren’t looking too bright.

“It’s once again the market kind of obsessing that there’s really little good news about the economy,” said Edmund Hyland, managing director and global investments specialist at JPMorgan Private Bank in Atlanta. “I think anytime you’re in the kind of bear market we’re in, you kind of struggle along the bottom for a while.”

Investors are also increasingly uneasy about the financial industry. Deutsche Bank AG’s announcement that it lost an estimated $6.4 billion in the fourth quarter intensified the market’s concerns that banks in general are still suffering and will need more government help.

“People were thinking we were coming toward the end of this financial meltdown, but as you can tell from the news today, we’re not even close to the end yet,” said Dave Rovelli, managing director of trading at brokerage Canaccord Adams. “Financials are the backbone of the economy. If they aren’t stable, you aren’t going to see a sustainable rally.”