NEW YORK — Investors sent stocks lower Monday as anxiety over the growing list of firms affected by investment manager Bernard Madoff magnified Wall Street’s concerns about the health of the financial sector.
Stocks had traded mixed early on as investors were relieved to hear that President George W. Bush was working on providing short-term government help for the auto industry. The Senate’s rejection of a $14 billion bailout for automakers last week had raised the possibility of a major bankruptcy, which some analysts say would result in as many as 3 million U.S. job losses next year.
But as that fear eased somewhat, it gave way to concerns about companies’ exposure to Madoff’s fund. Well respected in the investment community after serving as chairman of the Nasdaq stock market, Madoff was arrested Thursday for orchestrating what prosecutors say was a $50 billion Ponzi scheme to defraud investors.
Firms with exposure include HSBC Holdings PLC, Banco Santander, BNP Paribas, Royal Bank of Scotland Group PLC and hedge fund Man Group PLC. And the list of prominent investors keeps growing.
“This is a massive fraud taking down very intelligent people, very sophisticated investors, and it just leaves you a little bit shaky in terms of who’s really monitoring the store,” said Jay Wong, principal and portfolio manager of Los Angeles-based money manager Payden & Rygel.
The ordeal dealt another blow to investors’ confidence in the market, analysts said.
“The investor psyche is already quite fragile. Scandals like this just add fuel to the fire,” said Alan Gayle, senior investment strategist for RidgeWorth Capital Management.
The Dow Jones industrial average finished down 65.15, or 0.75 percent, to 8,564.53. The Standard & Poor’s 500 index lost 11.16, or 1.27 percent, to 868.57, while the Nasdaq composite index fell 32.38, or 2.10 percent, to 1,508.34.
Volume is expected to remain light this week, the last full week of trading this year, ahead of the holidays. Analysts were quick to point out that light volume often skews the market’s moves.
“There doesn’t seem to be a whole lot of activity in the market right now,” said Joe Keetle, senior wealth manager of Dawson Wealth Management. “On small volume, the market can move dramatically one way or the other.”
Investors also seemed hesitant to make any major moves ahead of the Federal Reserve’s decision today on interest rates. Some analysts anticipate policymakers will cut the key rate by a half- point to 0.5 percent, while others expect a three-quarter- point reduction to 0.25 percent — which would be the lowest federal funds rate on records going back to 1954.
Despite Monday’s moderate decline, investors have been showing a greater tolerance for bad economic and corporate news in recent sessions, leading some analysts to believe that the market may be showing some stability after the horrific selling of the past three months.
