Stocks retreat as anxiety grows over credit crisis

Stocks skidded Tuesday despite another drop in oil prices as downbeat news from financial companies aggravated the market’s anxiety about the effect of the credit crisis on the economy. The Dow Jones industrials fell nearly 140 points.

The latest reminder of continuing troubles for banks and brokerages came late Monday when JPMorgan Chase said that less than halfway through the third quarter it had lost $1.5 billion on home loans and mortgage-backed securities in the period, compared with $1.1 billion for all of the second quarter.

The banking giant also predicted in a regulatory filing that the global economy would continue to be weak, capital markets would remain under stress and housing prices would keep declining.

“The financial worries have just crept back in,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research. “But given the rally we had last week” -- when the Dow gained 408 points -- “we’re still holding on if you look at the big picture. We were due for some kind of a break.”

The market’s losses were mitigated by oil’s sixth decline in seven trading days. Crude futures fell $1.44 to $113.01 a barrel on the New York Mercantile Exchange. Oil is down more than $30 from its record closing high of $145.29 on July 3.

The Dow slumped 139.88, or 1.2%, to 11,642.47. Broader stock indicators also declined. The Standard & Poor’s 500 index fell 15.73 points, or 1.2%, to 1,289.59, and the Nasdaq composite index fell 9.34 points, or 0.4%, to 2,430.61.

The Russell 2,000 index of smaller companies fell 6.12 points, or 0.8%, to 744.94.

Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange.

Government bond yields fell along with stocks. The benchmark 10-year Treasury note slid to 3.9% from 4% late Monday.

The dollar climbed against most other major currencies, while gold prices sank.

An index of financial stocks in the S&P; 500 tumbled 5.2%, underperforming each of the nine other broad industry groups.

JPMorgan fell $3.97, or 9.5%, to $37.92 on its disclosure of losses in its mortgage portfolio.

Rival bank Citigroup dropped $1.28, or 6.5%, to $18.54 after billionaire Michael Price of MFP Investors said he was betting against the stock because the company had “more pain coming.”

Goldman Sachs Group dropped $11.21, or 6.3%, to $166.79 after several analysts lowered their ratings and earnings estimates for the investment bank.

UBS fell $1.34, or 6.2%, to $20.35. Switzerland’s largest bank reported $5.1 billion in second-quarter write-downs and said it would separate divisions such as its investment bank from its wealth management unit.

Wachovia fell $2.17, or 12%, to $16.04 after saying it would cut 600 more jobs than expected. The bank also said it had added $500 million to its accounting provision for legal costs, citing its settlement discussions with regulators concerning its sale of auction-rate securities.

Morgan Stanley declined $2.89, or 6.4%, to $42.50. Deutsche Bank cut its estimate of the Wall Street firm’s earnings a day after Morgan said it would buy back $4.5 billion in auction-rate securities.

In other market highlights:

* Target fell $1.87, or 3.7%, to $49.36 after a Credit Suisse analyst raised concerns about the big-box retailer’s profitability because of revisions to the terms of its Target Visa card.

* Overseas, key stock indexes fell 1% in Japan, 0.1% in Britain and 0.4% in Germany and France.