23 Apr 2009

Wall St stumbles on bank worries

10:12 am on 23 April 2009

The Dow and S&P fell on Wednesday after Morgan Stanley revived concerns about the banking sector and the wider economy after it posted its second straight quarterly loss and slashed its dividend.

The Nasdaq, however, eked out a gain after AT&T reported a profit that fell less than expected, and an analyst said its iPhone partnership with Apple Inc is starting to help rather than hurt profits. AT&T was up 1.8% at $US25.74.

The market, which had been up much of the day as investors initially seized on company comments suggesting that corporate profits were stabilizing, has been sensitive to the outlook for banks ahead of the government's "stress test" results expected in the days ahead.

Morgan Stanley slid 9% to $US22.44 after it posted its third loss in six quarters on real estate losses and a charge wiped out fees and trading profits. The KBW Bank Index fell 4.9%.

Banks have been a key component in leading the six-week rally that drove the broad S&P 500 up nearly 25% from March's bear market lows.

The Dow Jones industrial average dropped 82.99 points, or 1.04%, to 7,886.57. The Standard & Poor's 500 Index slid 6.53 points, or 0.77%, to 843.55. The Nasdaq Composite Index gained 2.27 points, or 0.14%, to 1,646.12.