US stocks fall on shrinking GDP, Citigroup deal

Wall Street shares tumbled at the opening on Friday after data showing a deeper-than-anticipated fourth-quarter contraction in the US economy and a deal announced to boost the government stake in Citigroup. The Dow Jones Industrial Average slipped 115.01 points (1.60 percent) to 7,067.07 in the first trades while the Nasdaq composite slumped 14.34 points (1.03 percent) to 1,377.13. The Standard & Poor's 500 index retreated 15.47 points (2.05 percent) to 737.36. The market reacted to news of a 6.2 percent drop in US economic activity in the fourth quarter, worse than expected and far steeper than the earlier government estimate of a 3.8 percent decline. The news "is perhaps the clearest indication of the current woes of the US economy. The report indicates contraction throughout most of the economy," said Augustine Faucher at Economy.com. Also denting sentiment was an announcement that the US government will own up to 36 percent of Citigroup under a deal announced Friday to convert up to 25 billion dollars of capital injected into the ailing bank to ordinary shares. The conversion does not call for more government funds but helps shore up the troubled banking giant's capital position, according to Citi and US officials. "Both entities are playing up the idea that this bid to boost Citi's tangible common equity doesn't involve any extra taxpayer money," said Patrick O'HAre at Briefing.com. "What this maneuver does involve is a sobering reminder to private investors that the rules can change to benefit the government's holdings when it is deemed necessary."