Stocks fall on housing woes
Stocks sank Tuesday after the country’s top two economic officials voiced concern about the slumping housing market’s effect on the economy.
In a speech late Monday, Federal Reserve Chairman Ben S. Bernanke said the slumping housing market remained a “significant drag” on the economy. His comments were echoed early Tuesday by Treasury Secretary Henry M. Paulson Jr.
The remarks elevated economic concerns as investors sifted through mixed third-quarter earnings news and watched oil prices rise.
“First of all, the worry is we’re getting more bad news on housing. No. 2 is higher oil prices. That’s a pretty bad combination,” said Hugh Johnson, chief investment officer of Johnson Illington Advisors.
Oil futures closed at another record high Tuesday, and an index that tracks home builders’ sales expectations fell for the eighth consecutive month to the lowest point in more than 22 years.
A day after Citigroup reported a steep third-quarter profit decline and announced plans with other banks to set up a fund to bolster the market for asset-backed commercial paper, Wells Fargo and some other banks released disappointing results.
The Dow Jones industrial average fell 71.86 points, or 0.5%, to 13,912.94.
The Standard & Poor’s 500 index slid 10.18 points, or 0.7%, to 1,538.53, and the Nasdaq composite index dropped 16.14 points, or 0.6%, to 2,763.91. The Russell 2000 index of smaller companies fell 6.01 points, or 0.7%, to 823.35.
The tech-dominated Nasdaq could get a boost today because Yahoo and Intel posted better-than-expected third-quarter results after the bell Tuesday.
After falling $1.17 to $26.69 during the regular session, Yahoo stock was up 8% to $29.01 in after-hours trading. Intel was quoted at $26.80 after hours, up 5%, after falling 27 cents to $25.48 in regular trading.
Bond yields fell along with stock prices. The yield on the 10-year Treasury note slipped to 4.65% from 4.68% late Monday.
The dollar rose against the euro but fell against the yen. Gold prices edged down.
Oil futures rose $1.48 to a record close of $87.61 a barrel in New York after briefly surpassing $88.
Decliners outnumbered advancers by about 8 to 3 on the New York Stock Exchange.
The Fed reported Tuesday that U.S. industrial output rose 0.1% last month, restrained by a slump at automakers. The increase in production at factories, mines and utilities matched expectations and followed no change in August.
Most financial and housing-related stocks fell. The S&P; 500 financials index dropped 1.9% and contributed the most to the overall index’s decline.
Wells Fargo said it boosted loan-loss reserves, anticipating more troubles in consumer credit. The company’s shares fell $1.40 to $34.55.
Midwest regional bank KeyCorp fell $1.91, or 5.9%, to $30.44. Its profit fell 33%, more than expected, on losses from loan sales and write-downs the company attributed to “extraordinary volatility” in the credit markets.
Countrywide Financial retreated 25 cents to $18.09 after a Goldman, Sachs & Co. analyst boosted his estimate of the mortgage giant’s third-quarter loss. The Calabasas-based company may significantly write down its loan portfolio because of a weakening credit market and mortgage-related losses, the Goldman analyst wrote, predicting a loss in the quarter of $1 a share, compared with his previous forecast of a 13-cent loss. Analysts polled by Bloomberg forecast a loss of $1.03 a share. The company is scheduled to release its results next week.
Bright financial spots included State Street, a trust bank that posted a profit rise of 29% on strong revenue from servicing fees and trading services, and Bear Stearns, for which a Chinese government investment arm is said to be planning a bid. State Street jumped $5.75, or 8.3%, to $74.68. Bear Stearns rose $2.36, or 2%, to $123.05.
A gauge of home builders in S&P; indexes lost 3.5%. D.R. Horton, the biggest U.S. home builder by market value, dropped 72 cents to $12.86. The company said the value of home orders it took in plunged 48% to $1.3 billion in the latest quarter.
In other market highlights:
* Ericsson plunged $9.60, or 23%, to $31.33 after the Swedish wireless network company warned that it would report lower-than-forecast sales and earnings, and that revenue might fall in the current quarter.
* General Motors slumped $1.70 to $39.41 after Bear Stearns downgraded the carmaker.
* China Precision Steel climbed 91 cents to $10.14 after the Shanghai-based steel producer’s fiscal 2007 revenue soared 55%. But profit fell 1% because of Nasdaq listing expenses and a rise in bad-debt provisions.
* ValueClick tumbled $3.23 to $24.55. The online-advertising firm said it expected third-quarter sales to come in at the low end of expectations, and it cut its sales prediction for the year.
* Overseas, key stock indexes fell 1.3% in Japan, 2% in Hong Kong, 0.5% in Britain and 0.1% in Germany.
