7 Apr 2009

Wall Street rally stumbles over bank fears

9:06 am on 7 April 2009

US stocks broke a four-day winning streak after a prominent analyst revived worries over the health of banks and the potential collapse of a takeover of Sun Microsystems bruised sentiment in the technology sector.

Veteran analyst Mike Mayo, of Calyon Securities, cited the ongoing consequences of risk-taking by banks and warned of rising loan losses by the end of 2010. He rated a number of big and regional banks at "underperform" or "sell."

Bank stocks suffered, with JPMorgan Chase & Co tumbling 3.7% to $US28.20, while Wells Fargo dropped 6.7% to $US15.25.

The renewed worries about banks came after stocks rallied off 12-year lows in the last month, fueled in part by reassuring comments from major banks about their performance in the beginning of the year.

Shares of Sun Microsystems Inc. slumped 22.5% to $US6.58 after a source with knowledge of the matter said talks with IBM to acquire its smaller rival broke down. IBM eased 0.7% to $US101.56 and was among the top drags on the Dow.

The Dow Jones industrial average fell 41.74 points, or 0.52%, to 7,975.85. The Standard & Poor's 500 Index lost 7.02 points, or 0.83%, to 835.48. The Nasdaq Composite Index was down 15.16 points, or 0.93%, at 1,606.71.