Banks Dive In USA

The close: A good bank is hard to findRTGAMNorth American stocks were hit hard on Thursday after investors grew increasingly nervous about financial earnings and the state of consumer spending after major U.S. chains released dismal statistics on same-store sales.The Dow Jones industrial average closed at 11,431.43, down 224.64 points, or 1.9 per cent. The broader S&P 500 closed at 1266.10, down 23.09 points, or 1.8 per cent. In Canada, where investors followed the U.S. lead, the S&P/TSX composite index closed at 13,385.17, down 68.34 points, or 0.5 per cent, despite rising energy stocks.Financial stocks began the day as the biggest drags on the stock market and finished that way, too, a day after American International Group Inc. announced a whopping second-quarter loss that reignited wider concerns about writedowns, slashed dividends and equity requirements within the financial sector.AIG plunged 18.1 per cent - the biggest one-day loss in its nearly 40-year history as a public company, according to Bloomberg News - and dragged down just about every insurer and bank in its wake. Citigroup Inc. fell 6.2 per cent, Lehman Brothers Holdings Inc. fell 13.6 per cent and Fannie Mae fell 14.2 per cent, blowing big holes in the recent impressive rebound in financial stocks.In Canada, the Big Banks and major insurance companies were also the biggest laggards. Royal Bank of Canada fell 3.2 per cent, Bank of Nova Scotia fell 2.6 per cent and Manulife Financial Corp. fell 3.4 per cent.Meanwhile, Wal-Mart Stores Inc. fell 6.3 per cent - just one day after hitting a four-year high, when investors considered it a safe stock - after the world's largest retailer handed investors evidence that it, too, could be a victim of slower U.S. economic growth. Sales at stores open for at least one year are expected to rise between 1 and 2 per cent in August, well below expectations.Earlier, investors had been operating under the belief that Wal-Mart and a number of other discount retailers were likely to profit from the U.S. economic downturn, since strapped consumers tend to seek better deals lower down the retail food chain. That belief has now been shredded.Copyright 2001 The Globe and Mail