Wall Street report: Monday close

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Investor sentiment was cautious from the outset, with hopes ebbing that America's central bank would deliver a hoped-for interest rate cut when it meets today (Tuesday). Company news was generally negative, given the latest shock to the struggling airline industry.

US Airways, America's seventh-biggest airline, said it would keep flying through bankruptcy reorganisation, helped by a $500m (£340m) injection of bank loans. The airline, which owes $7.8bn, was in trouble before September 11 and had found difficulty winning over passengers and its unions since then, analysts said.

The shares, which closed at $2.45 on Friday, did not trade officially on the New York Stock Exchange, but a 'third market' sale went through at 50 cents, down 80%. Merrill Lynch was one of the brokers ending coverage of the shares in the belief that shareholders' equity would be 'wiped out entirely'. The airline's market value at Friday's close was close to $170m.

The knock-on effect was apparent with worries that United Airlines would follow US Airways into bankruptcy court. Shares in UAL, United's parent company, slumped $1.40 or 27% to $3.80. Rival AMR, the biggest US airline, saw its shares trimmed $1.23 or 13% to $8.36.

Aircraft maker Boeing dropped 50 cents or 1.2% to $40.50. Electronic systems company EDS, which has a big contract with US Airways, slid $1.10 or 3% to $35.20.

Financial services shares, which jumped last week on hopes that the Federal Reserve would cut rates this week, saw selling. Analysts said chances of a rate cut appeared small, with Fed chairman Alan Greenspan likely to await more data on the strength of the economy. American Express eased 95 cents or 2.6% to $35, Citigroup fell 66 cents or 2% to $33.65 and JP Morgan was marked down 86 cents or 3.3% to $25.49.

Robert Hormats, vice-chairman (international) of Goldman Sachs, said he thought the Fed would sit tight, with interest rates already at their lowest in 40 years. 'Greenspan usually signals if he is going to change rates and he has not,' Hormats said. Several other economists said they expected the Fed to cut rates by the end of September if economic data does not show a pick up in economic growth.

Economists will be parsing the Fed's statement, which should come out at about 7.15pm UK time, to see if it has changed its bias back toward easing monetary policy in the wake of weaker data on consumer confidence, retail sales and jobs and falling share markets.

Merrill Lynch shed 99 cents or 2.8% to $34.67 as it confirmed that the Securities and Exchange Commission and the Justice Department had requested documents concerning its relationship with collapsed energy trader Enron.

Techs were generally lower on analysts' comments about the sector's outlook. Chip equipment maker Novellus fell 63 cents or 2.3% to $26.39. Intel was lower by 33 cents or 2% at $17.53.

Another uncertainty cited by analysts was the Wednesday deadline for the certification of company books by chief executives and chief financial officers. Only about 15% of the executives have complied so far and there has been speculation that markets could be knocked if high-profile companies decline to certify their financials before the deadline.