|
Economy, credit worries drive
Wall St down sharply
Kristina
Cooke
Reuters
Tuesday Aug 28, 2007
U.S. stock indexes tumbled more than 2 percent on Tuesday after
Merrill Lynch warned that ailing credit markets will hurt bank
profits, while reports showing eroding consumer confidence and
falling home prices added to concerns about the economy.
The mood worsened late in the day after the release of minutes
from the Federal Reserve's August7 policy meeting.
The transcript showed growing concern among Fed officials about
the housing market and its effect on consumers even before credit
market turmoil picked up speed.
Reflecting unease that the fallout from the subprime debacle
is spreading, shares of State Street Corp (STT.N: Quote, Profile,
Research), the world's biggest institutional money manager, fell
4.3 percent on worries about the company's $20 billion-plus in
commitments to asset-backed commercial paper programs.
(Article continues below)
Meanwhile, British bank Barclays Plc (BARC.L: Quote, Profile,
Research) denied a report that it has several hundred million
dollars of exposure to failed debt vehicles structured by its
investment banking arm.
Merrill Lynch (MER.N: Quote, Profile, Research) downgraded Bear
Stearns Cos (BSC.N: Quote, Profile, Research), Lehman Brothers
(LEH.N: Quote, Profile, Research) and Citigroup (C.N: Quote, Profile,
Research) to "neutral" from "buy" and lowered
estimates for the banks' earnings due to turbulence in the debt
markets, slowing takeover activity and upheaval in the mortgage
sector.
"Merrill downgrading the banks and the housing and consumer
confidence data were a fundamental package that took us down,"
said Jim Paulsen, chief investment officer at Wells Capital Management,
in Minneapolis.
And the market "smells of the stuff that hurt us a week
or two ago -- rumors of other problems that could emerge,"
he said.
The Dow Jones industrial average (.DJI: Quote, Profile, Research)
skidded 280.28 points, or 2.10 percent, to 13,041.85. The Standard
& Poor's 500 Index (.SPX: Quote, Profile, Research) dropped
34.43 points, or 2.35 percent, to 1,432.36. The Nasdaq Composite
Index (.IXIC: Quote, Profile, Research) tumbled 60.61 points,
or 2.37 percent, to 2,500.64.
U.S. consumer sentiment took its sharpest plunge in nearly two
years during August while home prices swooned in the second quarter,
according to reports that show the housing crisis is taking its
toll.
The Conference Board's index of consumer confidence dropped in
August to its lowest reading in a year, while a report from S&P/Case-Shiller
showed house prices fell 3.2 percent in the second quarter compared
with the same period last year. It was their worst decline in
20 years.
Adding to home builders' woes, a survey by the National Association
of Home Builders showed tighter lending standards in recent months
have hurt business at two-thirds of the nation's home builders
that were already suffering from burgeoning inventories.
Home builders Centex (CTX.N: Quote, Profile, Research) and Lennar
(LEN.N: Quote, Profile, Research) led the Dow Jones home builders
index (.DJUSHB: Quote, Profile, Research) down almost 5 percent.
Centex dropped 7 percent to $28.15, while Lennar slid 4.7 percent
to $27.23.
Stocks of the banks downgraded by Merrill Lynch dropped, with
shares of Citigroup falling 3.5 percent to $46.14 on the New York
Stock Exchange. Shares of Bear Stearns slid 3.4 percent to $108.42
and Lehman Brothers shed 6 percent to $54.28. The S&P financial
index (.GSPF: Quote, Profile, Research) followed suit, down 3.2
percent.
Merrill's move came a day after Goldman Sachs (GS.N: Quote, Profile,
Research) slashed its earnings forecasts on Bear Stearns, Lehman
Brothers and Morgan Stanley (MS.N: Quote, Profile, Research).
"All the brokers are downgrading each other, which was a
long time coming, but obviously, the market is a little jittery
surrounding anything related to that stuff these days," said
Michael Church, senior portfolio manager at Church Capital Management,
in Philadelphia.
Shares of State Street Corp, the world's largest institutional
money manager, fell 4.3 percent to $61.16.
Shares of Maxim Integrated Products Inc (MXIM.O: Quote, Profile,
Research) fell 5.6 percent to $29.39, after Banc of America downgraded
the analog chip maker. (ID:nBNG274570: Quote, Profile, Research).
Trading was light on the NYSE, with about 1.40 billion shares
changing hands, far short of last year's estimated daily average
of 1.84 billion, while on Nasdaq, about 1.58 billion shares traded,
also well below last year's daily average of 2.02 billion.
Declining stocks outnumbered advancing ones by a ratio of about
7 to 1 on the NYSE and by 4 to 1 on Nasdaq.
|
INFOWARS:
BECAUSE THERE'S A WAR ON FOR YOUR MIND
|
|
