(Updates to late morning)
By Ellis Mnyandu
NEW YORK, Jan 11 (Reuters) - U.S. stocks fell on Friday on
fears mounting credit-card defaults at companies such as
American Express Co <AXP.N> portend a slowdown in consumer
spending and raise the chances for a recession.
The worrisome economic outlook contributed to losses in
shares of consumer-oriented companies, including personal care
company Procter & Gamble Co <PG.N> and telecommunications
provider AT&T Inc <T.N>.
Merrill Lynch & Co Inc <MER.N> is expected to suffer $15
billion in losses stemming from soured mortgage investments,
the New York Times said, citing people who had been briefed on
the bank's plans. For details, see []
American Express led declines among financial shares, with
a slide of more than 9 percent.
"Everything you see indicates that the financial problems
are getting worse rather than better," said Michael Metz, chief
investment strategist at Oppenheimer & Co in New York.
"The news that American Express, which normally caters to
the upscale consumer is going to have enormous write-offs in
credit cards illustrates that the financial system now faces
write-offs from commercial real estate loans, credit cards,
auto loans and so forth. It's giving investors cause for
concern."
The Dow Jones industrial average <> was down 183.95
points, or 1.43 percent, at 12,669.14. The Standard & Poor's
500 Index <.SPX> was down 15.32 points, or 1.08 percent, at
1,405.01. The Nasdaq Composite Index <> was down 32.75
points, or 1.32 percent, at 2,455.77.
In another financial development, Bank of America Corp
<BAC.N> said it would buy struggling mortgage lender
Countrywide Financial Corp <CFC.N> . Uncertainty over what the
deal would mean for the second-largest U.S. bank added to the
market's negative tone, analysts said. Moody's Investors
Service said it may cut Bank of America's credit rating.
American Express shares dropped 9.9 percent to $44.00 on
the New York Stock Exchange, marking its biggest drop since
Sept. 2001. The credit card company said its profit warning was
the result of a slowdown in cardholder spending and rising card
delinquencies.
On Thursday rival Capital One Financial Corp <COF.N> also
warned about its profit outlook. Capital One shares dropped 4.9
percent to $40.84.
Shares of P&G, which makes a range of consumer products,
including Pampers diapers and Crest toothpaste, fell 2.2
percent to $70.90.
Shares of AT&T declined 2.2 percent to $38.53 on the NYSE.
Earlier this week the company said it was seeing an increase in
the number of customers it has had to disconnect as they fall
behind their bills for home phone and Internet service.
Shares of Countrywide fell 17 percent to $6.44. Bank of
America set the takeover terms at a discount to Thursday's
Countrywide close. Shares of Bank of America fell 2.2 percent
to $38.43.
In other bank news, CNBC reported that JPMorgan Chase & Co
<JPM.N> has had very preliminary talks about buying lender
Washington Mutual Inc <WM.N>, whose stock jumped 3 percent to
$14.58.
(Editing by Kenneth Barry)
