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Stocks drop as bank woes continue
Friday June 20, 9:52 am ET
By Madlen Read, AP Business Writer
Stocks drop on financial sector woes; oil prices rebound ahead of Saudi oil meeting


NEW YORK (AP) -- Stocks tumbled Friday on escalating worries about the financial sector and rebounding oil prices. The Dow Jones industrial average sank more than 130 points.
Merrill Lynch -- which reportedly slashed earnings estimates for regional banks Friday -- was the target of market rumors that it may issue its own profit warning. Merrill Lynch spokeswoman Jessica Oppenheim declined to comment. Merrill shares dropped $1.70, or 4.5 percent, to $36.

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The rumors added to anxiety over the Moody's Investors Service decision late Thursday to downgrade the two biggest bond insurers -- MBIA Inc. and Ambac Financial Group Inc. -- from "AAA" amid ongoing concerns about their financial health. MBIA shares plunged 69 cents, or 10.5 percent, to $5.77, and Ambac fell 8 cents, or 4 percent, to $1.95.

Moody's had already warned of a possible downgrade, and the move followed similar actions by rival agencies Standard & Poor's and Fitch Ratings. But it nevertheless underscored the troubles that the nation's money centers face. On Thursday, Citigroup Inc. warned of significant debt markdowns for the second quarter, and Washington Mutual Inc. announced 1,200 job cuts.

Meanwhile, crude oil futures jumped $3.46 to $135.39 a barrel on the New York Mercantile Exchange, recovering some of the $5 a barrel drop on Thursday on news of a fuel price hike in China.

Investors are awaiting this weekend's meeting in Saudi Arabia of oil producers and consumer nations, which could bring some solutions to the problem of soaring oil prices. But many analysts believe the gathering might end up being a mere finger-pointing session.

The Dow Jones industrial average slumped 132.23, or 1.10 percent, to 11,930.86. The blue chip index has not closed below 12,000 since mid-March.

Broader stock indicators also dropped. The Standard & Poor's 500 index fell 13.16, or 0.98 percent, to 1,329.67, and the Nasdaq composite index fell 27.54, or 1.12 percent, to 2,434.52.

New York Stock Exchange: http://www.nyse.com

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