Stocks suffer sharp retreat
Stocks pulled back sharply Tuesday as investors worried about fundamental economic problems as well as ongoing credit market woes. The Dow Jones industrial average skidded more than 200 points.
The stock slide began when Wal-Mart Stores said its earnings wouldn’t meet expectations this year as consumers reined in spending. Home Depot added to the slide when it said weakness in the housing market caused its quarterly profit to drop.
Confirmation that Sentinel Management Group Inc., which manages $1.5 billion in assets, was seeking to halt investor withdrawals exacerbated the selling.
And Swiss bank UBS, the world’s largest wealth manager, warned that market turmoil would probably hit its investment banking business in the second half of the year.
Retail and financial shares were especially hard hit.
Stocks have been pummeled since key indexes hit record closes July 19, as a deepening credit crunch has spooked the market and led to unease about potential losses at financial firms and funds.
The earnings reports Tuesday and their implications for consumer spending compounded an already high state of anxiety on Wall Street.
“The market is very, very sensitive at this point, and any news about potential financial problems is going to affect the way that the market trades,” said Scott Fullman, director of investment strategy for I.A. Englander & Co.
The Dow Jones industrials fell 207.61 points, or 1.6%, to 13,028.92, putting it on the verge of falling below the 13,000 mark, which it first crossed in late April.
The Standard & Poor’s 500 index shed 26.38 points, or 1.8%, to 1,426.54, and the Nasdaq composite index fell 43.12 points, or 1.7%, to 2,499.12.
The Russell 2000 index of smaller-company stocks fell 16.94 points, or 2.2%, to 762.87.
Losers outnumbered winners by more than 6 to 1 on the New York Stock Exchange.
The retreat ended a one-day reprieve from triple-digit moves in the Dow, showing the market had not moved past its protracted period of volatility. The Dow is up 4.5% for the year, the S&P; 500 is ahead 0.6% and the Nasdaq is up 3.5%. The three indexes are also below their recent lows reached Aug. 3.
Treasury bond yields fell, with the benchmark 10-year Treasury note falling to 4.73% from 4.78% late Monday as stock investors resumed their recent trend of moving into securities deemed less volatile.
Crude oil futures rose 76 cents to $72.38 on the New York Mercantile Exchange. The dollar was lower against other major currencies, while gold prices fell.
Shares rose early Tuesday after the Labor Department released data depicting moderate inflation excluding food and energy and after the Federal Reserve, which injected cash into the banking system on each of the previous three trading days, refrained from adding or draining liquidity. But the early stock gains soon gave way to concerns about consumer spending and credit woes.
Among financial stocks, Lehman Bros. Holdings, the biggest underwriter of U.S. mortgage bonds, sank $3.63, or 6.3%, to $53.67, giving the stock its worst four-day loss since September 2001. Goldman Sachs fell $7.75, or 4.4%, to $169.75. Bear Stearns, which in early summer disclosed that two of its funds had been all but wiped out, fell $3.60, or 3.3%, to $106. U.S.-traded shares of UBS slumped $2.60, or 4.8%, to $51.49.
Countrywide Financial, the largest U.S. mortgage lender, skidded $2.15, or 8.1%, to $24.46 after the company said foreclosures and delinquencies rose in July to their highest level in several years. Other mortgage stocks also fell.
Retail shares were hit after Wal-Mart said some of its customers were straining under economic pressures. Wal-Mart shares tumbled $2.35, or 5.1%, to $43.82. Home Depot fell $1.72, or 4.9%, to $33.52 after issuing a profit warning.
RadioShack, the No. 3 U.S. consumer electronics retailer, slumped $1.57, or 6.7%, to $22.
The battering of home builders’ stocks did not let up, with the Dow Jones U.S. home construction index slumping 4.5%. Beazer Homes slid $1.01, or 8.2%, to $11.33 after its debt was downgraded by one rating firm and was targeted for a downgrade by another. Pulte Homes fell $1.43, or 7.6%, to $17.42
In other market highlights:
Mattel shares fell 57 cents, or 2.4%, to $23 after it announced its second big recall of Chinese-made toys in two weeks.
Shares of Palo Alto-based software firm VMware soared $22, or 76%, to $51 in their debut.
Overseas, key stock indexes tumbled 1.7% in Japan, 1.6% in France, 1.2% in Britain and 0.7% in Germany.
