Friday’s Market Recap: Stocks Down On Government’s Stake In Citigroup

Friday’s market slipped once again as news that the government will continue and take a large stake in Citigroup’s (C) common stock shares, stemming fears of a future heavy governmental regulated bank system.  The Dow Jones Industrial Average (^DJI) slipped another -1.66% to a level of 7,062.93 while the Nasdaq (^IXIC) and S&P (^GSPC) fell -0.98% and -2.36% respectively to closes of 1,377.84 and 735.09.  Crude oil slipped -$1.03 to a close of $44.19 while gold and copper slipped -$2.40 and -0.37 cents respectively to closes of $940.20 and $1.54.  The decline closed out a terrible month on the market as a whole, as the DJIA hit its lowest level since May 1997 as the blue-chip index fell for a sixth straight month.

Gross domestic product decreased at a seasonally adjusted -6.2% annual rate October through December, the Commerce Department said Friday in a new and revised estimate of fourth-quarter GDP.  The -6.2% decline meant the worst quarterly showing for GDP since a -6.4% decrease in first-quarter 1982 GDP.

Citigroup shares tumbled after the government said it will convert up to $25 billion in the bank’s preferred shares to common stock in a move that could dilute existing shareholders’ ownership by over 74%.

Healthcare and drug companies, such as Merck & Co (MRK) and Johnson & Johnson Inc (JNJ), fell for a second day on Friday on worries that U.S. President Barack Obama’s budget proposal will strangle profits as the administration tries to rein in healthcare costs.

General Electric Co. (GE) announced today that they will be cutting their dividend by two-thirds to a remainder of ten cents a share, as they look to save $9 billion a year in costs in order to maintain their triple A, top-tier credit rating.  Moody’s Investors Service and Standard & Poor’s said in statements today that the dividend cut would be a factor as they consider GE’s creditworthiness, but both rating agencies left their top credit ratings unchanged after the news.

Disclosure: The mutual fund the author manages is long JNJ.

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