US STOCKS-Wall Street falls as Goldman stirs credit fears
(Updates to midday, changes byline)
By Ellis Mnyandu
NEW YORK, Dec 18 (Reuters) - U.S. stocks fell on Tuesday as Goldman Sachs Group Inc's (GS.N) quarterly results and comments about its business outlook fueled further uncertainty about the prospects for the financial services sector.
While Goldman Sachs, the largest U.S. securities firm, reported earnings that topped forecasts, it said it was cautious about its near-term business outlook, saying the subprime market hasn't yet reached bottom.
Its stock dropped more than 5 percent, falling below the $200 level for the first time since mid-September.
Traders said the company failed to reassure investors that the financial sector had seen the worst of the credit market meltdown.
"You're not going to to have a really healthy tape if financials are again getting hit pretty hard across the board. I think a lot of this has to do with Goldman," said Anthony Conroy, head trader for BNY ConvergEx, an affiliate of the Bank of New York.
Goldman executives, in a conference call, "said their firm expects more redemptions from funds, they said there's still going to be more fallout from the subprime issue," Conroy noted. "Even though profits surpassed earlier estimates, they were still a little bit to the lighter side," he added.
The Dow Jones industrial average .DJI was down 59.91 points, or 0.45 percent, at 13,107.29. The Standard & Poor's 500 Index .SPX was down 7.96 points, or 0.55 percent, at 1,437.94. The Nasdaq Composite Index .IXIC was down 18.75 points, or 0.73 percent, at 2,555.71.
Goldman shares were the third biggest drag on the S&P 500, down 5.04 percent at $198.12 on the New York Stock Exchange.
The decline contributed to a drop of 1.5 percent in the S&P financial index .GSPF.
Goldman Sachs Chief Financial Officer David Viniar told analysts in the conference call that redemptions from some poorly performing hedge funds would accelerate in the new fiscal year. For details, see [ID:nN18470605]
Shares of JPMorgan Chase & Co (JPM.N), the No. 3 U.S. bank, led the Dow's decliners, sliding 2.8 percent to $43.30 on the NYSE. Shares of Citigroup Inc (C.N), the largest U.S. bank, were down 2.3 percent at $30.06.
Investors fear that the credit crisis could hamper lending to businesses and consumers, compounding the outlook for the economy as the housing market deteriorates. There are also growing fears about the specter of rising inflation.
Shares of industrial companies that are particularly sensitive to business cycles also sold off. Shares of plane maker Boeing Co (BA.N) dropped 1.03 percent to $86.50, making boeing the second worst-performing Dow component after JPMorgan.
Concern that business spending could slow hit shares of technology bellwethers, including Apple Inc (AAPL.O), whose stock declined 2.1 percent to $180.63 on the Nasdaq. (Reporting by Ellis Mnyandu; Editing by Leslie Adler)
