NEW YORK (Reuters) - Bears could have the upper
hand again this week if Wall Street fails to get assurance that
major banks can be rescued without being seized by the U.S.
The Dow breached a six-year low in the holiday-shortened
week amid mounting fears that the White House would nationalize
banks, thus wiping out shareholders.
Stocks pared losses in the final hours of trading Friday
after the White House said it strongly believed in a privately
held bank system.
"We don't care about anything but bank details at this
point," said Robert Francello, head of equity trading for Apex
Capital hedge fund in San Francisco. "It's all about bank
details and a bank rescue."
With indexes at multiyear lows, the focus will be on
battered banks Citigroup and Bank of America, two
of the cheapest stocks on the Dow, after a top U.S. senator on
Friday said short-term nationalization for some banks was
The fate of both companies will have important consequences
for the sector and the broad U.S. economy that is in the throes
of an ever-deepening recession, analysts said.
"We're dependent on seeing some stability in the financial
sector," said Steve Goldman, market strategist for Weeden & Co
in Greenwich, Connecticut.
"Each day we walk into the market and we see them down 5 to
8 percent. It makes it difficult for stocks to advance."
For the week, the Dow fell 6.2 percent and the S&P dropped
6.9 percent, while the Nasdaq stumbled 6.1 percent. It was the
Dow's lowest close since October 2002.
The economy's troubles are likely to be confirmed by
corporate results to be released this week by bellwethers Home
Depot , Target Corp and Dell .
Investors will also parse through reams of data this week,
including the Case-Schiller index of home prices, sales of both
existing and new homes, and Friday's preliminary report on U.S.
gross domestic product for the fourth quarter. The Commerce
Department issued an advance report on fourth-quarter GDP last
month that showed the economy had contracted by a 3.8 percent
The data will provide some clues as to the state of the
fragile U.S. housing market, the eye of the economic storm that
triggered the credit crunch.
"It will be important to watch the home sales data," said
Alan Gayle, senior investment strategist of RidgeWorth
Investments. "If home sales are steady or they tick up ever so
slightly that will be an encouraging sign."
Gayle added that investors should watch what is happening
with the "inventory overhang" of unsold homes.
But in coming days, the focus will remain squarely on
Washington as Wall Street hope for details on a plan to bolster
the financial sector, which suffered steep losses last week.
Citing unnamed U.S. Treasury sources, CNBC said the
administration will release some details this week on its bank
rescue plan. A Treasury spokesman told Reuters he could not
immediately comment on the report.
Federal Reserve Chairman Ben Bernanke is set to testify on
monetary policy before the Senate Banking Committee on Tuesday
and Paul Volcker, a top economic adviser to President Barack
Obama, testifies before a Joint Economic Committee hearing on
Investors will be watching both officials for any hints
about how the government will bolster banks.
Details will be key, especially after Christopher Dodd,
chairman of the Senate Banking Committee, told Bloomberg on
Friday that the option to nationalize banks, although
undesirable, was on the table.
Wall Street is still reeling from Treasury Secretary
Timothy Geithner's failure to provide any details when he
announced a bank plan.
"People are obviously very anxious to know what's going to
be done and trillions of dollars are at stake," said Marc Groz,
chief investment officer for Topos, an asset management and
risk advisory firm. "It's a battle about who's going to pick up
(Additional reporting by Edward Krudy; Editing by Leslie Adler
and Maureen Bavdek)
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