Renewed worries send stocks lower
NEW YORK » Wall Street tumbled yesterday as investors grappled with renewed worries about the soundness of the financial sector. The major indexes fell more than 2 percent, including the Dow Jones industrial average, which lost more than 230 points.
While many financial services companies logged steep declines during the session, government-sponsored lenders Freddie Mac and Fannie Mae were among those hardest hit. Investors are worried that the mortgage finance companies will have to sell more shares than anticipated to compensate for losses from the housing slump. Merrill Lynch & Co. also dropped, after Fitch Ratings put its long-term credit default rating on watch for a possible downgrade.
Meanwhile, oil remained a concern although it had dropped by more than $9 a barrel over the previous two sessions. Crude fluctuated before settling up a penny at $136.05 a barrel on the New York Mercantile Exchange.
The Dow fell 236.77, or 2.08 percent, to 11,147.44 a day after rising more than 150 points.
The Standard & Poor's 500 index fell 29.01, or 2.28 percent, to 1,244.69, while the Nasdaq composite index fell 59.55, or 2.60 percent, to 2,234.89.
The Russell 2000 index of smaller companies fell 18.97, or 2.78 percent, to 663.75.
The pullback again left the indexes in bear market territory, having logged declines of more than 20 percent since their October highs. The indexes have been moving in and out of bear market territory in recent sessions.
Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where consolidated volume came to 5.06 billion shares compared with 5.92 billion shares traded Tuesday.
Bond prices edged higher yesterday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.82 percent from 3.89 percent late Tuesday.
The dollar fell against other major currencies. Gold prices rose.
The Chicago Board Options Exchange's volatility index, known as the VIX, and often referred to as the "fear index," rose 9 percent in the session.
"Nervousness breeds volatility," said Anthony Conroy, managing director and head trader for BNY ConvergEx Group. "It's a challenging environment."
Freddie fell $3.20, or 24 percent, to $10.26, while Fannie fell $2.31, or 13 percent, to $15.31. The two companies also dragged the broader stock market lower on Monday as worries arose about their cash levels.
Merrill Lynch fell $3.03, or 9.3 percent, to $29.74.
A negative analyst note about Cisco Systems Inc. weighed on the technology sector. Cisco hit a new 52-week low of $21.54 and ended down $1.30, or 5.7 percent, at $21.58 after an RBC Capital Markets analyst cut his price target on the network equipment maker. The CEO recently said technology spending will recover later than the company originally thought.