I hate to bring this up, given all the good feelings today, but as Washington celebrates, Wall Street had a record Inauguration Day slide, led by fears that banks are in terrible shape and getting worse, CNBC reports:
An index of bank stocks lost 19.7 percent on fears of more losses. The Dow Jones industrial average fell 332.13 points, or 4.01 percent, to end unofficially at 7,949.09. The S&P 500 Index slid 44.90 points, or 5.28 percent, to finish unofficially at 805.22.
The Nasdaq Composite Index tumbled 88.47 points, or 5.78 percent, to close unofficially at 1,440.86.
Financial shares alone fell to a 14-year low, Bloomberg added:
State Street Corp., the largest money manager for institutions, tumbled 59 percent after unrealized bond losses almost doubled. Wells Fargo & Co. and Bank of America Corp. slumped more than 23 percent on an analyst’s prediction that they’ll need to take steps to shore up their balance sheets. The Dow Jones Industrial Average plunged 4 percent, the most on an Inauguration Day in the measure’s 112-year history.
As if that’s not bad enough, there’s more. Also from Bloomberg:
U.S. financial losses from the credit crisis may reach $3.6 trillion, according to New York University Professor Nouriel Roubini, who predicted last year’s economic and stock-market meltdowns. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion,” Roubini said at a conference in Dubai today. “This is a systemic banking crisis.”
Calculated Risk puts the problems in perspective:
From an economic perspective, Mr. Obama’s first few weeks in office will be critical as his administration finalizes the stimulus package and addresses the ongoing crisis in the banking system. Best wishes to Mr. Obama. You are now on the clock.
I guess today’s slide is just Wall Street’s way of welcoming the new administration.