Dow down 185 on sub-prime worries
Wall Street ended a volatile week with a sharp decline Friday as investors succumbed to nervousness about souring sub-prime loans and rising oil prices. The Dow Jones industrial average fell more than 185 points.
The steep pullback a day after a respectable gain was characteristic of the erratic recent weeks Wall Street has had as it has dealt with concerns about interest rates, hedge funds and more recently the prospects of unfavorable legislation.
Friday’s session began with a focus on the initial public offering by Blackstone Group. The most talked-about IPO since Google went public saw the buyout shop’s stock open well above the $31 offering price but decline during the session and close where it had been priced late Thursday. The stock closed at $35.06, up $4.06, or 13%, from the offering price. Enthusiasm over Blackstone wasn’t broad enough to prop up the markets, however.
The Dow tumbled 185.58 points, or 1.4%, to 13,360.26, as 29 of its 30 stocks lost ground. On Thursday, stocks fluctuated before ending higher, with the Dow gaining 56 points after a 146-point tumble Wednesday.
The Standard & Poor’s 500 index fell 19.63 points, or 1.3%, to 1,502.56, and the Nasdaq composite index fell 28.00, or 1.07%, to 2,588.96.
More than 10 stocks fell for every three that rose on the New York Stock Exchange.
It was a rough week for the stock market. The Dow lost 2.1%, while the S&P; 500 fell 2% and Nasdaq lost 1.4%.
Stocks lost ground Friday even though bond yields fell. The yield on the benchmark 10-year Treasury note slipped to 5.13% from 5.19% late Thursday.
The dollar rose against the yen but fell against the euro, while gold prices gained.
Oil prices climbed. Crude futures rose 49 cents to $69.14 a barrel on the New York Mercantile Exchange.
Investors have been grappling with concerns about whether the economy would heat up and prompt the Federal Reserve to put off cutting interest rates or perhaps even raise them. Also, concerns about the health of two Bear Stearns hedge funds that hold assets backed by sub-prime mortgages weighed on the markets Friday. Investors grew more nervous that such problems would spread.
In addition, news from Washington has shown some lawmakers to be impatient with the vast sums that some Wall Street investors have generated, raising the possibility that they could move to tamp down big payouts with higher taxes. Several House Democrats on Friday proposed an increase in the taxes paid by those who manage hedge funds and private equity firms.
Financial stocks dropped on the developments. Citigroup fell $1.25 to $52.41, while Bank of America slipped 94 cents to $48.95, JPMorgan retreated $1.12 to $48.72 and Bear Stearns slid $2.06 to $143.75.
Bill Schultz, chief investment officer at McQueen, Ball & Associates, said the pullback in stocks wasn’t unexpected given the sizable gains Wall Street had seen. Even with Friday’s losses, the Dow is up 7.2% for the year, the S&P; 500 is up 5.9% and the Nasdaq is up 7.2%.
“There’s a point where you need to see a pause before people get excited again,” he said.
Friday’s session brought added volatility for some stocks as the Russell indexes replaced some companies in the gauges with others. Such changes can stir unusual trading activity as investment managers who seek to track one of the indexes try to square their holdings with the gauge’s latest look.
The Russell 2,000 index of smaller companies fell 5.06 points, or 0.6%, to 834.75.
In other market highlights:
* Jabil Circuit, a contract electronics manufacturer, rose $1.93, or 9.1%, to $23.13 after its fiscal third-quarter profit, excluding items such as restructuring costs, topped Wall Street’s estimate.
* Abercrombie & Fitch fell $2.87 to $73.71 after the retailer of clothing for teens and college students was cut to “equal weight” from “overweight” at Lehman Brothers.
* Sirius Satellite Radio rose 17 cents, or 6%, to $3.01 on a favorable report by a media research firm.
* Overseas, key stock indexes fell 0.3% in Japan, 3.3% in Shanghai, 0.4% in Britain, 0.2% in Germany and 0.1% in France.
