Dwindling confidence sees US stocks end with heavy losses

MUMBAI: Lack of consumer confidence and signals that the US Federal Reserve is not likely to cut interest rates saw US indices drop over two per cent. Financials led declines followed by energy stocks. The New York-based Conference Board's index declined to 105 from 111.9 in July. Economists forecast the index would slip to 104 from an originally reported July reading of 112.6. Consumer confidence fell the most this month since Hurricane Katrina two years ago. Also, a report from S&P/Case-Shiller showed house prices fell 3.2 per cent in the second quarter compared with the same period last year. It was the worst decline in 20 years. To make matters worse, the release of minutes from the Federal Reserve's Aug.7 policy meeting showed central bankers put aside concerns about the rising cost of credit because they weren't convinced a slowdown in inflation would last. The transcript showed growing concern among Fed officials about the housing market and its effect on consumers even before credit market turmoil picked up speed. Merrill Lynch downgraded Bear Stearns, Lehman Brothers and Citigroup to ‘neutral’ from ‘buy’ and lowered estimates for the banks' earnings due to turbulence in the debt markets, slowing takeover activity and upheaval in the mortgage sector. Citigroup fell 3.5 per cent, Bear Stearns slid 3.4 per cent and Lehman Brothers shed 6 per cent. Home builders also slumped led by Centex, down 7 per cent, and Lennar down 4.7 per cent. Shares of State Street, the world's biggest institutional money manager, fell 4.3 per cent on worries about the company's $20 billion-plus in commitments to asset-backed commercial paper programs. Shares of Maxim Integrated Products fell 5.6 per cent after Banc of America downgraded the analog chip maker. Energy stocks dropped 2.5 per cent as a group after prices for crude oil fell below the $72 mark in New York. Exxon Mobil and Chevron ended sharply lower. The Dow Jones Industrial Average dropped 280 points or 2.10 per cent to 13,041.85. The Standard & Poor's 500 Index lost 34 points or 2.35 per cent to 1,432.36. The Nasdaq Composite Index tumbled 61 points or 2.37 per cent to 2,500.64.