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US stocks dive as treasury plans to prop consumer lending

world Updated: Nov 13, 2008 10:47 IST
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As the US Treasury Department said it will prop up consumer lending as part of the emergency financial bail-out, US stock indices plunged more than four per cent on Wednesday, with the Standard & Poor's 500 index dropping to a near five-year low.

The technology-heavy Nasdaq Composite Index also reached a five- year low.

US Treasury Secretary Henry Paulson's plans to shift some of the focus of the final half of the $700-billion rescue fund to credit card and loan companies reflected growing concern over drops in consumer spending, auto buying and student borrowing.

"This market, which is vital for lending and growth, has for all practical purposes ground to a halt," Paulson said.

American Express, the stalwart credit card company, is to apply for $3.5 billion in US federal emergency assistance, The Wall Street Journal reported. AmEx shares tumbled 10 per cent.

Citigroup Inc and the Standard & Poor's 500 Financials Index slid to 12-year lows as Paulson said the Treasury would scrap its original plans to buy up soured mortgage assets. Best Buy, the largest electronics retailer, lost 8 per cent after saying that profits will decrease in "the most difficult climate we've ever seen," the Bloomberg financial news agency reported.

"It's hard to get away from the drumbeat of negatives," Liam Dalton of Axiom Capital Management was quoted as saying.

In Europe, the FTSE 100 shed 1.52 per cent, the CAC 40 lost 3.07 per cent, and the DAX dropped 2.96 per cent.

Brazil's Bovsepa lost 7.75 per cent to close at 34,373.99.

The blue-chip Dow Jones Industrial Average lost 411.3 points, or 4.73 per cent, to 8,282.66. The broader Standard & Poor's 500 Index fell 46.65 points, or 5.19 per cent, to 852.3. The technology-heavy Nasdaq Composite Index dropped 81.69 points, or 5.17 per cent, to 1,499.21.

For the year to date, the Dow industrials have shed 37.56 per cent of its value; S and the Nasdaq dropped 43.57 per cent.

The US currency continued to rise, reaching 79.987 euro cents from 79.962 cents Tuesday. Against the Japanese currency, the dollar slipped to 95.015 yen from 97.647 yen on Tuesday.