Traders on Wall Street panicked in the wake of fraud charges against Goldman Sachs, sending stocks and commodities tumbling.The Securities & Exchange Commission's decision to charge Goldman with misleading investors stunned traders and triggered an im
Traders on Wall Street panicked in the wake of fraud charges against Goldman Sachs, sending stocks and commodities tumbling.
The Securities & Exchange Commission's decision to charge Goldman with misleading investors stunned traders and triggered an immediate stock slide that then spread through other markets.
In commodities, gold fell 2% and oil declined almost 3%. In currency markets, the euro fell to $US1.3510 from $US1.3579 as investors piled out into the dollar. They also fled to the Japanese yen, sending the yen higher against the greenback.
The SEC has charged Goldman Sachs – and a London-based French employee – with securities fraud relating to the sale of a collateralised debt obligation.
The complaint alleges that ABN Amro, now part of the Royal Bank of Scotland, lost $US840.9 million, and that IKB Deutsche Industriebank lost almost all of its $US150 million invested.
The Dow Jones Industrial Average had its biggest decline in two months, dropping 125.91 points, or 1.1% to 11,018.66. Still, the Dow posted its seventh straight week of gains, its longest winning streak since the seven-week period ending in May 2007.
Trading surged, with 8.29 billion shares trading hands on the New York Stock Exchange, the most since May 7, 2009. Average volume for the year until Friday was 4.77 billion.
Goldman Sachs shares plunged 12.8%, to close at $160.70. It was the biggest one-day dollar drop in the stock's history.
It lead a broad decline in financial stocks. Morgan Stanley dropped 5.6%, JP Morgan Chase declined 4.7% and Citigroup shed 5.2%.
Bank of America fell 5.5%, while GE slid 2.7%. Bank of America's $3.2 billion profit exceeded analysts' expectations but declined from a year earlier, while GE's first-quarter earnings fell 31%.
The S&P 500 Index fell 19.54 points, or 1.61%, to 1192.13, closing below the key 1200 level it captured earlier this week for the first time since September 2008.
Earnings from the technology companies including Google and Advanced Micro Devices also received a negative reaction from investors despite being above expectations.
This weighed on the Nasdaq Composite Index, which sank 34.43, or 1.37% to close at 2481.26.
Other markets
Stocks in Europe ended sharply lower Friday, sliding as a complaint alleging securities fraud against Goldman Sachs rattled markets even as two of the main victims were based on the Continent.
RBS shares, which had already climbed following an increased price target by Bank of America Merrill Lynch, finished the day with a 5.1% advance, while IKB finished the session down 1.3%.
The Stoxx Europe 600 index dropped 1.6% to 267.92 after previously closing at a 18-month high..
The German DAX index lost 1.8% to 6180.90, the French CAC-40 index fell 1.9% to 3986.63 and the UK FTSE 100 index dropped 1.4% to 5743.96.
The airline sector also was pounded after European air space remained closed for a second day because of the Icelandic volcanic cloud spread over northern Europe. Lufthansa shares fell 4.1% and German airport operator Fraport fell 2.7%.
Asian markets fell, with the Japanese yen's strength against major currencies weighing down shares of its exporters. Chinese stocks were hurt by Beijing's move to curb property speculation.
Japan's Nikkei Stock Average of 225 companies shrank 1.5% to 11,102.18, Australia's S&P/ASX 200 fell 0.3% 4984.66, Korea's Kospi shed 0.5% to 1734.49, Hong Kong's Hang Seng Index lost 1.3% 21,865.26, Taiwan's Taiex slid 0.7% to 8111.57 and China's Shanghai Composite lost 1.1% 3130.30.
Commodities: Oil, gold down
Crude prices ended at their lowest point this month with futures dropping more than $US2 a barrel in New York.
Futures for June delivery, the most active contract, lost $US2.08 to settle at $US84.67 a barrel in New York after trading as high as $US86 a barrel earlier in the week.
Crude for May delivery, the front-month contract, settled $US2.27 lower at $US83.24 a barrel. The May contract lost 2%, while the June contract declined 1.2% in the week.
Gold for June delivery, the most actively traded contract, fell $US23.40, or 2%, to settle at $US1136.90 an ounce. Gold prices have lost 2.5% in the week.
Copper and sugar prices also fell.
Currencies: Dollar, yen up; euro down
The US dollar extended gains versus the euro and other major currencies after stocks dropped.
The US currency had been solidly higher before the Goldman news as Greece was seen preparing to tap a standby-emergency-aid package from the European Union and International Monetary Fund.
The euro fell to $US1.3500, from $US1.3575 late on Thursday.
The dollar rose as much as 1% against the New Zealand currency and 1.2% against the Australian dollar, two currencies that frequently fall when risk appetite declines.
The Japanese yen has also been swayed by such risk aversion, often more than the dollar. The dollar slipped to ¥92.15 from ¥93.03 late on Thursday.
