Stocks rally from financials sell-off
Major U.S. stock indexes fell to two-week lows Monday, dragged down once again by heavy selling of financial-company shares.
The market rebounded from its lows of the session, however. The Dow Jones industrials, down as much as 149 points at the day’s low, closed with a loss of 51.70 points, or 0.4%, at 13,543.40.
The Standard & Poor’s 500 index slid 7.48 points, or 0.5%, to 1,502.17.
Technology stocks, which have helped buoy the broad market in recent weeks, were weak. The tech-heavy Nasdaq composite index fell 15.20 points, or 0.5%, to 2,795.18.
In other trading, oil prices retreated while gold edged up to a 27-year high.
Wall Street opened sharply lower amid new doubts about the health of the biggest U.S. banks. Citigroup Chief Executive Charles Prince quit Sunday as the bank warned that it may take additional write-downs of as much as $11 billion because of losses on mortgage securities.
Citigroup shares fell for a fifth straight session, ending down $1.83, or almost 5%, at $35.90, their lowest level since 2003.
Shares of other financial giants also tumbled, extending this year’s losses. The New York Stock Exchange financial stock index fell 1.7%.
Federal Reserve Gov. Randall Kroszner said conditions for sub-prime-mortgage borrowers might get worse because home prices will probably stay “sluggish” into 2008, according to the text of a speech he gave Monday.
Soaring mortgage delinquencies are at the heart of the credit crisis that has riled global financial markets since midsummer.
U.S. mortgage losses will be as much as $250 billion over the next five years, according to bond analysts at Lehman Bros. Commercial banks, government-chartered firms Fannie Mae and Freddie Mac, and mortgage and bond insurers would be affected the most by losses, which will be about $50 billion in 2008, Lehman analysts estimated.
Although market indexes ended with moderate declines Monday, losers outnumbered winners by about 3 to 1 on the New York Stock Exchange.
In commodity markets, oil pulled back after reaching an all-time high of $95.93 a barrel on Friday. Near-term futures fell $1.95 to $93.98 in New York.
But gold, which has been rising with oil, extended its rally. Near-term gold futures gained $2.40 to $808.10 an ounce, the highest since 1980.
The dollar was mixed against key currencies. In the Treasury bond market long-term yields were little changed. The 10-year T-note yield edged up to 4.34% from 4.32% on Friday.
Among the day’s market highlights:
Shares of most major financial companies fell with Citigroup. Bank of America dropped 66 cents to $44.45, JPMorgan Chase slid 38 cents to $42.77, Merrill Lynch lost $1.40 to $55.88 and Goldman Sachs was down $11.21 to $218.39.
Morgan Stanley sank $3.31 to $55.59 on rumors the firm might announce a large write-down on investments. A company spokesman declined to comment.
Also in the financial sector, Fannie Mae fell 61 cents to $52, Freddie Mac gave up 99 cents to $47.34 and mortgage insurer Radian tumbled 63 cents to $9.20.
MBIA, the biggest bond insurance firm, fell $2.28 to $33.23.
Crocs plunged $6.07, or 13%, to $41.45. The stock plummeted 31% last week after the footwear company gave a 2007 sales forecast that was weaker than some investors expected.
Utility stocks attracted investors looking for a haven. Dominion Resources rallied $1.11 to $91.80 and Exelon jumped $2.15 to $83.92.
In foreign trading, Asian markets tumbled on concerns about U.S. credit-market woes and as Chinese authorities signaled a retreat from a plan to allow mainland investors to buy Hong Kong-listed stocks. The Hong Kong market tumbled 5%.
Asian markets also were rattled after Pakistan’s president imposed emergency rule. The Pakistani market slumped 4.4%.
