NEW YORK, Feb 26 – US share prices ended a roller-coaster session lower Wednesday as the market reacted to a weaker-than-expected report on home sales and details of the Obama administration\’s bank rescue program.
The Dow Jones Industrial Average fell 80.05 points (1.09 percent) to close at 7,270.89 after swings in both directions.
The tech-dominated Nasdaq fell 16.40 points (1.14 percent) to 1,425.43 and the broad Standard & Poor\’s 500 index shed 8.24 points (1.07 percent) to 764.90.
Opening losses accelerated after news that US existing home sales fell 5.3 percent in January as potential buyers waited to see the impact of the economic stimulus package.
The market swung briefly into positive territory after US authorities unveiled the new phase of a bank rescue plan including "stress tests" for major lenders.
Jon Ogg at 24/7 Wall Street said the new bank rescue announcement that avoided mention of nationalization "took away the sting of what was considered a defeat for banks and big business" in President Barack Obama\’s address to Congress Tuesday.
The stress tests are a key element of the bank rescue program announced by the Obama administration, which according to some analysts could lead to big government stakes and possibly nationalization.
John Ryding at RDQ Economics said the rescue plan is "necessary but it\’s clearly not sufficient."
The market was digesting a rally of more than three percent for the main indexes Tuesday, partly in anticipation of Obama\’s speech to Congress.
Some analysts said Federal Reserve chairman Ben Bernanke earlier eased fears about nationalization of banks and maintained his outlook for an economic recovery later this year.
Patrick O\’Hare at Briefing.com said the market was energized Tuesday by the notion that bank nationalization appears to be off the table for now.
"We might get pretty excited about that move, if not for the fact that we have seen monster moves like that before eventually give way to a fresh round of concerns and new lows," he said.
"It\’s a positive driver for now that the worst-case scenario seems to be off the table.
Ultimately, though, nothing changed for the financial sector yesterday from a fundamental standpoint. It\’s still burdened by toxic assets and the lack of a concrete, credible plan to purge the assets from balance sheets."
Bank of America helped lead the comeback, shaking off early losses to rise 9.09 percent to 5.16 dollars after news of the stress tests.
Ogg said the banking giant "was a winner based on more data about stress tests, banks, and not being nationalized."
Citigroup pared its early losses but ended down 3.08 percent at 2.52 dollars.
General Motors rose 14.86 percent to 2.55 dollars a day ahead of its quarterly earnings report while rival automaker Ford rose 0.5 percent to 2.01.
Bonds fell heavily. The yield on the 10-year US Treasury bond rose to 2.945 percent from 2.799 percent Tuesday while that on the 30-year bond increased to 3.601 percent against 3.494 percent. Bond yields and prices move in opposite directions.
Market action was mixed elsewhere. In Europe, stocks mostly fell, with the exception of London\’s FTSE 100 index which inched up 0.85 percent following comments by a British government minister against bank nationalizations.
Frankfurt shares dropped 1.27 percent, while Paris slipped 0.41 percent after the publication of new data showing the extent of the economic crisis in Europe and warnings that Ukraine could be moving towards financial collapse.
Asian stocks rose on the back of that rally in the run-up to Obama\’s speech to the US Congress, with Tokyo\’s Nikkei-225 index soaring 2.65 percent, Hong Kong rising 1.6 percent and Shanghai inching up 0.27 percent.