Dow falls 387 points on subprime fallout
NEW YORK » Wall Street plunged again yesterday after a French bank said it was freezing three funds that invested in U.S. subprime mortgages because it was unable to properly value their assets. The Dow Jones industrials extended its series of triple-digit swings, this time falling more than 380 points.
The announcement by BNP Paribas raised the specter of a widening impact of U.S. credit market problems. The idea that anyone -- institutions, investors, companies, individuals -- can't get money when they need it unnerved a stock market that has suffered through weeks of volatility triggered by concerns about tight credit and bad subprime mortgages.
A move by the European Central Bank to provide more cash to money markets intensified Wall Street's angst. Although the bank's loan of more than $130 billion in overnight funds to banks at a low rate of 4 percent was intended to calm investors, Wall Street saw it as confirmation of the credit markets' problems. It was the ECB's biggest injection ever.
The Federal Reserve added a larger-than-normal $24 billion in temporary reserves to the U.S. banking system.
Retailers released July sales figures yesterday that were overall disappointing.
The Dow fell 387.18, or 2.83 percent, to 13,270.68.
Yesterday's pullback continued an erratic pattern of triple-digit moves in the Dow since the index closed at a record 14,001.41 on July 19.
Bonds rose sharply as investors again sought the relative safety of Treasurys, pushing down the yield on the benchmark 10-year note to 4.79 percent from 4.89 percent late Wednesday.
The broader Standard & Poor's 500 index fell 44.40, or 2.96 percent, to 1,453.09.
The Nasdaq composite index fell 56.49, or 2.16 percent, to 2,556.49. On Wednesday, it posted its biggest point gain in more than year.
The dollar was mixed against other major currencies, while gold prices fell. Light, sweet crude fell 56 cents to $71.59 per barrel on the New York Mercantile Exchange.
Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where volume came to 2.8 billion shares compared with 2.6 billion shares traded Wednesday.
The Russell 2000 index of smaller companies fell 10.79, or 1.36 percent, to 784.87.
The pullback came after BNP Paribas Investment Partners said it was suspending three funds together worth about $3.79 billion and wouldn't make investor redemptions until it could determine net asset values.
Shares of financial companies, which investors have fled recently amid lending concerns, took another beating yesterday. Citigroup Inc. fell 5 percent, as did fellow Dow component JPMorgan Chase & Co.
In another sign of credit market trouble, Home Depot Inc. warned that the sale of its wholesale business might bring in less than expected. The world's largest home improvement retailer, which also cut how much it intends to pay to repurchase stock, said volatility in the stock, debt and housing markets has led to the possible repricing. Home Depot fell $2.01, or 5.3 percent, to $35.79, and was the worst performer of the 30 Dow components.