U.S. stocks are likely to face choppy waters next week, as the debate about whether or not to nationalize banks intensifies along with growing investor demand to rid the financial system of its toxic assets.
"Financial markets appear to be fixated on 'toxic' assets, and until they are removed from bank balance sheets, pressure will remain on the sector," said Benjamin Reitzes, an analyst at BMO Capital Markets.
Such concerns have helped drive the Dow Jones Industrial Average (DJI) to fresh six-year lows. For the week, the blue-chip average fell more than 6%, marking its worst week since October of last year.
The broad S&P 500 index (SPX) fell nearly 7% for the week, while the Nasdaq Composite (RIXF) lost 6%.
A big chunk of the pain came from the financial sector, where Bank of America (BAC) sank to new lows and Citigroup (C) fell to an 18-year low on Friday amid concern the government may take over the banks, wiping out their shareholders.
Senate Banking Committee Chairman Christopher Dodd on Friday said banks may have to be nationalized for a short time, according to Bloomberg News. But Robert Gibbs, the White House press secretary, said the Obama administration supports a privately held banking system.
While the comments seemed to help financial shares come off their lows Fridays, stocks on Wall Street have again taken a turn for the worse since last week after Treasury Secretary's Tim Geithner unveiled a plan to help ailing banks.
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