US stocks fall on lower home sales, bank nationalization woes
US stocks fell Wednesday after reported sharp drop in home sales and the markets' mixed response to the Treasury Department's plan to stabilize the banking system, dpa reported.
The decline erased Tuesday's strongest gain in a month and came despite assurances from Federal Reserve Chairman Ben Bernanke that the government would not nationalize major US banks in danger of collapse.
He told legislators Wednesday that the government preferred to use public-private partnerships, which were temporary and involved taking only a portion of banks' shares in exchange for emergency government money.
Nationalization involved completely shutting out private shareholders. "We don't plan anything like that," Bernanke told the House Financial Services Committee.
He was elaborating on similar comments made in Senate testimony Tuesday as the government aims to ease investor fears that have driven US stocks to their lowest index levels in more than a decade.
Shares of bank stocks were volatile through the day, and Citigroup and Goldman Sachs ended lower, while Wells Fargo, JP Morgan Chase and Bank of America closed higher.
Also dragging markets down was a report Wednesday that said sales of existing homes slid 5.3 per cent in January to the lowest since 1997.
The blue-chip Dow Jones Industrial Average fell 80.05 points, or 1.09 per cent, to 7,270.89. The broader Standard & Poor's 500 Index shed 8.24 points, or 1.07 per cent, to 764.9. The technology-heavy Nasdaq Composite Index dropped 16.4 points, or 1.14 per cent, to 1,425.43.
The US currency dropped against the euro to 78.61 euro cents from 77.88 euro cents on Tuesday. The dollar rose against the Japanese currency to 97.45 yen from 96.74 yen.