(Updates with U.S. markets, changes byline, dateline; previous
LONDON)
By Jennifer Ablan
NEW YORK, Jan 15 (Reuters) - U.S. stocks fell sharply on
Tuesday, with the Dow industrials posting triple-digit losses
by midday, as a record quarterly loss at Citigroup <C.N> and
weak retail sales data deepened concerns about the magnitude of
the credit and housing crises.
Safe-haven buying boosted U.S. Treasury debt prices, which
have benefited from the mortgage meltdown, with benchmark
yields at their lowest in nearly four years, while the dollar
dropped to a 2-1/2-year low against the Japanese yen.
"It looks like retail sales is causing investors to
increase their expectations for a consumer-led recession and
that is driving equity prices lower," said Tom Sowanick, chief
investment officer of Clearbrook Financial LLC in Princeton,
New Jersey.
Sales at U.S. retailers fell 0.4 percent in December and
were less vigorous in November than previously thought,
according to a government report that implied costlier energy
and slumping housing prices were taking a toll on consumers.
But nervousness over the depth of the economic slowdown was
exacerbated by Citigroup, the largest U.S. bank, which reported
earnings-per-share losses nearly twice what was expected and
slashed its dividend by 41 percent.
Citi also said it had fewer writedowns from the credit
crisis than analysts had expected, although they amounted to a
colossal $18.1 billion.
Also on Tuesday, financial services company State Street
Corp reported lower fourth-quarter net income after it set
aside millions for legal costs tied to mortgage securities
losses while U.S. Bancorp, the sixth-largest U.S. bank,
suffered a 21 percent fall in fourth-quarter profit.
Investors are watching bank earnings closely to see how
hard the credit crisis has hit and to gauge the overall state
of the industry.
The Dow Jones industrial average <> fell 215.66 points,
or 1.69 percent, to 12,562.49. The Standard & Poor's 500 Index
<.SPX> was down 29.14 points, or 2.06 percent, at 1,387.11. The
Nasdaq Composite Index <> was down 50.36 points, or 2.03
percent, at 2,427.94.
Among other indexes, the Russell 2000 index <> was down
13.98 points, or 1.96 percent, at 698.50.
BONDS BID STRONGLY AGAIN
Not coincidentally, U.S. Treasury debt prices moved higher
as selling pressure on stocks sent investors seeking safe-haven
government bonds.
The benchmark 10-year U.S. Treasury note <US10YT=RR> jumped
15/32 in price, with the yield at 3.718 percent. The 2-year
U.S. Treasury note <US2YT=RR> traded flat, yielding 2.557
percent. The 30-year U.S. Treasury bond <US30YT=RR> was up
30/32, with the yield at 4.301 percent.
In foreign exchange trade, the dollar weakened against a
basket of major currencies, with the U.S. Dollar Index <.DXY>
down 0.15 percent at 75.50 from a previous session close of
75.613.
Against the Japanese yen, the dollar <JPY=> eased 1.86
percent at 106.93 from a previous session close of 108.96.
The euro <EUR=> was up 0.49 percent at $1.4847 from a
previous session close of $1.4775.
The FTSEurofirst 300 <> index of top European shares
was down 2.57 percent, weakened among other things by Britain's
largest retailer Tesco, which missed sales forecasts.
Germany's ZEW also reported that German investor sentiment
declined more than expected.
"The outlook for markets is all linked to whether we are in
a mid-cycle slowdown or global recession and the problem is
that the two of them look very, very similar at the start, but
have different market consequences," said Andrew Lynch,
European fund manager at Schroders.
Meanwhile, Japan's Nikkei ended below 14,000 for the first
time in 26 months, losing 1 percent to close at 13,972.63.
In energy and commodities prices, U.S. light sweet crude
oil <CLc1> fell $2.90, or 3.1 percent, to $91.30 per barrel,
and spot gold prices <XAU=> rose $12.50, or 1.4 percent, to
$907.90. The Reuters/Jefferies CRB Index <.CRB> was down 2.57
points, or 0.69 percent, at 367.65.
(Additional reporting by Jeremy Gaunt and Chris Reese;
editing by Gary Crosse)
