Banking, housing news adds to market gloom
NEW YORK » Wall Street resumed its slide today as Wall Street absorbed a gloomy outlook for the banking sector as well as bleak news from the National Association of Homebuilders. The major stock market indexes each fell more than 1.5 percent, with the Dow Jones industrial average giving up more than 200 points.
Concerns about the banking sector dominated the session. Goldman Sachs Group Inc.'s downgrade of large banks, and its estimate that Citigroup Inc. would have to write down $15 billion due to its exposure to risky debt over the next two quarters unnerved Wall Street.
Other sectors suffered big hits during the session, including airlines and automakers.
Housing stocks also suffered. The worry on Wall Street is that the housing market is getting so weak it will crimp consumer spending, which until now has helped keep the economy afloat. Ahead of the holiday shopping season, any signs that Americans are pulling back could prevent a December rally.
The NAHB's November housing forecast remained unchanged at its lowest-ever level even after the October figure was revised to 19 from 18. Economists polled by Thomson/IFR had expected the index would come in at 18."I think that a lot of folks are digesting the news from last week and they're worried about the economy and the ability to grow earnings at the larger companies in America," said Rob Lutts, chief investment officer at Cabot Money Management Inc. in Salem, Mass.
The Dow industrials fell 218.35, or 1.66 percent, to 12,958.44. Broader stock indicators also declined. The S&P 500 index fell 25.47, or 1.75 percent, to 1,433.27, and the Nasdaq composite index fell 43.86, or 1.66 percent, to 2,593.38.
The Russell 2000 index of smaller companies fell 19.15, or 2.49 percent, to 750.35. The pullback left the Russell firmly in negative territory for the year, with a decline of 4.74 percent. Investors often view smaller companies as more likely to be hit hard in a slowing economy because they can't as easily get by on thin margins as companies with big overseas operations.
Declining issues outnumbered advancers by 5 to 1 on the New York Stock Exchange, where volume came to 1.68 billion shares, compared with 1.77 billion traded Friday.
Government bond prices rose sharply today as investors sought safety. The yield on the 10-year Treasury note, which moves opposite its price, fell to 4.08 percent from 4.15 percent late Friday. The 10-year note hasn't gone below the 4.1 percent level since September 2005.
The dollar fell against other major currencies, while gold fell.
Crude oil futures for January delivery rose 80 cents to settle at $94.64 per barrel on the New York Mercantile Exchange.
Citigroup fell $2, or 5.9 percent, to $32 after the Goldman downgrade to a "sell" rating.
Lowe's Cos. lowered its forecast in anticipation of further deterioration in housing. Lowe's fell $1.89, or 7.6 percent, to $23.12.
Celgene Corp.'s announcement late Sunday that it agreed to buy Pharmion Corp. for $72 a share in a cash-and-stock deal worth $2.9 billion failed to lighten the overall mood on Wall Street. Celgene fell 90 cents to $64, while Pharmion jumped $15.84, or 32 percent, to $65.12.
Meanwhile, other sectors that could be bruised by an economic slowdown fell Monday. Delta Air Lines Inc. fell 96 cents, or 4.8 percent, to $19.01, while Continental Airlines Inc. fell $1.76, or 6 percent, to $27.82.