Wall Street losses continue
Wall Street extended last week’s losses Monday as investors remained concerned about flagging growth and rising prices. The Dow Jones industrial average fell more than 170 points.
Anxiety pervaded the market even as the Federal Reserve offered $20 billion in 28-day credit to commercial banks in an auction designed to help the economy by boosting banks’ lending to businesses and consumers.
A speech Sunday night by former Fed Chairman Alan Greenspan added to the market’s ill humor. Greenspan said “stagflation” -- when inflation worsens and the economy weakens -- was a growing possibility, given last week’s data showing accelerating consumer prices. With inflation on the rise, the Fed, which has reduced its benchmark interest rate three times since the summer, might feel less inclined to lower rates again.
In a speech Monday, President Bush acknowledged the economic environment, saying “there’s definitely some storm clouds and concern” because of the country’s mortgage and credit problems.
The Dow fell 172.65 points, or 1.3%, to 13,167.20, finishing near its low of the session.
Broader stock indicators also declined. The Standard & Poor’s 500 index dropped 22.05 points, or 1.5%, to 1,445.90, and the Nasdaq composite index fell 61.28 points, or 2.3%, to 2,574.46.
A Standard and Poor’s index of 600 small-company stocks slid 1.8% to just above its 52-week low reached Nov. 26. The index is down 4.2% this year, compared with a 2% gain for the big-company S&P; 500.
Smaller stocks may be under pressure as some investors unload their losers to record losses that can be used to offset capital gains in the 2007 tax year. Tax-related selling often hits already-depressed stocks in December.
The Russell 2,000 index of small-company stocks Monday fell 14.87 points, or 2%, to 739.06.
Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange.
Peter Cardillo, chief market economist at Avalon Partners Inc., said the market was affected by anticipation of Friday’s “quadruple witching,” a quarterly occurrence during which contracts expire for stock options, stock futures, stock-index futures and stock-index options.
The expirations, he said, magnified Wall Street’s mood, which has been downbeat because of uncertainty in the market about the effectiveness of the Fed’s actions and the overall economy. “It’s going to be a bumpy ride from here till the end of the year,” Cardillo said.
Last week, the Dow dropped 2.1%, the S&P; 500 fell 2.4% and Nasdaq lost 2.6%.
On Monday, yields on government bonds fell along with stock prices. The yield on the 10-year Treasury note slipped to 4.15% from 4.24% late Friday.
The dollar was mixed against other major currencies while gold prices rose.
Crude oil futures fell 64 cents to $90.63 a barrel on the New York Mercantile Exchange.
Strong corporate takeover activity early in the year helped the stock market surge, but deal news Monday failed to excite the overall market.
Diversified manufacturer Ingersoll-Rand said it would buy air-conditioner maker Trane for $10.1 billion. Trane soared $8.04, or 22%, to $45.24. Ingersoll-Rand shares fell $5.58, or 11%, to $43.60.
In other deals, Aon said it would sell two insurance units for $2.75 billion in separate cash transactions, and Loews said its board approved a spinoff of cigarette maker Lorillard. Loews climbed $1.14, or 2.4%, to $47.94. Aon rose 46 cents to $49.40.
And National Oilwell Varco said it would buy a smaller Houston oil drilling equipment maker, Grant Prideco, for $7.37 billion. National Oilwell fell $6.68, or 8.6%, to $70.69. Grant Prideco jumped $6.45, or 14%, to $53.91.
In other market highlights:
* Real estate investment trust shares fell for a fifth straight session. A Bloomberg index of 126 REITs slid 2.7% to a two-year low. General Growth Properties fell $2.20, or 5.1%, to $42.25, Vornado Realty was down $1.66, or 1.9%, to $84.52, and Macerich slumped $3.41, or 4.6%, to $71.20. As with other already-depressed stocks, year-end tax-related selling may be driving REITs down.
* Financial stocks were mostly lower. Goldman Sachs, which is due to report earnings today, fell $2.04 to $208.63, UBS slid $1.24 to $46.11, and Bank of America was off 46 cents to $41.70.
Countrywide Financial lost 39 cents, or 4%, to $9.41, its fifth straight decline, after analysts at Citigroup cut their recommendation on the stock to “hold” from “buy.”
* Mining stocks tumbled as copper prices fell to nine-month lows on worries that global economic growth will slow sharply in 2008. Freeport-McMoran Copper & Gold dropped $7.20, or 7.1%, to $94.91, while Southern Copper lost $4.48 to $100.70.
* Internet-related shares were down on fears that online holiday shopping will fall short of expectations. Amazon.com fell $3.99, or 4.5%, to $85.09, Priceline.com slid $7.86, or 6.7%, to $109.31 and Blue Nile sank $5.34, or 7.6%, to $64.60.
* Micron Technology fell 48 cents, or 5.7%, to $7.89 after a Jefferies & Co. analyst said an industry glut of dynamic random access memory chips had forced the chip maker’s product prices below the cost of production.
Intel slumped 57 cents, or 2.2%, to $25.72. A gauge of semiconductor companies in the S&P; 500 fell 2.1%.
* Caterpillar sank $2.23, or 3%, to $71.16 after Morgan Stanley downgraded the stock, saying sales volume and prices of U.S. construction equipment would fall in 2008.
* 99 Cents Only Stores slumped 27 cents, or 3.6%, to $7.19, a 10-year low. The stock is down 28% since Nov. 8, when the Commerce-based discounter said rising costs generated a loss in the quarter ended Sept. 30.
* Ambac Financial Group climbed $3.85, or 17%, to $26.66 after an analyst upgraded the bond insurer’s stock.
* Capital One Financial fell $1.54, or 3.3%, to $45.66. An analyst downgraded the stock to “sell,” forecasting larger-than-expected losses because of turmoil in credit markets.
* American Eagle Outfitters rose 87 cents, or 4.3%, to $21.14. Bear Stearns upgraded the stock, citing its strong brand and weak competition in the teen retail sector.
* Stocks tumbled overseas. Key indexes fell 1.7% in Japan, 3.5% in Hong Kong, 1.9% in Britain, 1.5% in Germany and 1.6% in France.
