US stocks fell sharply in New York on Friday as the fate of financial firms again became the main focus of attention.
Big losses at Merrill Lynch and American Express and a Bank of America proposal to acquire ailing home loan giant Countrywide Financial, in a $4 billion all-stock deal, highlighted again the uncertainty that still exists in the markets. Before the subprime crisis, Countrywide was a $500 billion home loan lender with 900 offices and $200 billion in assets.
The Dow Jones Industrial Average was off 113, or 0.88%, at 12740. The Standard & Poor's 500 shed 5 points, or 0.31%, at 1415 and the Nasdaq Composite Index dropped 20 points, or 0.80 at 2469.
The start of earnings season has investors worried about how banks and brokerages have performed after suffering losses in the collapse of the subprime mortgage market. America's biggest financial institutions will report results next week, including Merrill Lynch & Co., Citigroup Inc. and JPMorgan Chase & Co.
The New York Times reports today that Merrill Lynch is expected to suffer $15 billion in losses stemming from soured mortgage investments, almost double its original estimate, prompting the firm to raise additional capital from an outside investor.
Merrill, the nation’s largest brokerage firm, is expected to disclose the huge write-down when it reports earnings next week, according to people who have been briefed on its plans. The loss far exceeds the $12 billion hit many Wall Street analysts had forecast.
To shore up its deteriorating finances, Merrill is now in discussions with investors in the United States, Asia and the Middle East, including American private equity firms, to raise about $4 billion in the coming days, these people said.
American Express has warned that it it will have to take a charge of $440 million before tax in the fourth quarter to cover higher delinquencies and loan write-offs. Shares of American Express, a Dow industrials component, plunged 9.63%.
Live US Indices
European stocks suffered a fifth week of losses on recession fears.
The Dow Jones Stoxx 600 Index lost 0.37% and national benchmarks fell in 14 of the 18 western European markets. The UK's FTSE 100 fell 0.29%; France's CAC 40 dropped 0.61% and Germany's DAX rose 0.13%.
In Dublin, the ISEQ is up 0.32%.
National benchmarks - Europe
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Commodities
Gold futures rose above $900 an ounce for the first time Friday, as high oil prices, a weak dollar and fears of a US prompting buying of the precious metal.
An ounce of gold for February delivery on the Comex division of the New York Mercantile Exchange rose $6.50 to $900.1 in morning trading, an all-time high. Gold later reatreated to $898.70 an ounce but remained in record nominal territory.
Crude oil for February delivery is trading on the New York Mercantile Exchange (Nymex) at $93.28 a barrel down 43 cents overnight.
Currencies
The euro is trading at $1.4793 and at £0.7549.
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