Stocks end in slump amid lender worries
NEW YORK » Wall Street's angst over the ongoing fallout from the credit crisis made for a turbulent end to a volatile week yesterday -- stocks tumbled, soared and then turned south again as investors tried to assess the dangers faced by the country's biggest mortgage financiers, Fannie Mae and Freddie Mac.
The Dow Jones industrial average, which traded down more than 250 points in the session, briefly moved into positive territory yesterday before ending down more than 125 points. The blue chips also traded below 11,000 for the first time in two years.
A new high for oil prices above $147 a barrel also weighed on stocks.
Investors' focus was on the fate of the government-chartered companies. Shares of Fannie Mae and Freddie Mac fell sharply during the week on concerns about their stability.
The well-being of Fannie Mae and Freddie Mac is crucial because they hold or guarantee about $5 trillion worth of mortgages.
Sen. Christopher Dodd, D-Conn., the Senate Banking Committee chairman, raised the prospect that the companies could be given access to emergency Federal Reserve lending. Dodd, who spoke yesterday to Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson, said the two are "looking at various options" for propping up the firms if they ultimately need help.
The Dow fell 128.48, or 1.14 percent, to 11,100.54 after having fallen to 10,977.68. It last traded below 11,000 on July 25, 2006.
Broader stock indicators also logged declines. The Standard & Poor's 500 index fell 13.90, or 1.11 percent, to 1,239.49, and the Nasdaq composite index fell 18.77, or 0.83 percent, to 2,239.08.
Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to 1.73 billion shares.
The Russell 2000 index of smaller companies rose 4.51, or 0.67 percent, to 674.95.
The market's other trouble spot, oil, continued its ascent, rising to a trading record of $147.27 amid tensions between the West and Iran. Light, sweet crude for August delivery settled up $3.43 at $145.08, slightly below a record close of $145.29 a barrel set more than a week earlier.
Bond prices fell sharply as investors worried a bailout of Fannie Mae and Freddie Mac could dent the government's credit rating. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.95 percent from 3.80 percent late Thursday. The dollar was mixed against other major currencies, while gold prices rose.
Freddie Mac fell 25 cents, or 3.1 percent, at $7.75, after trading as low as $3.89 in the session. Fannie Mae tumbled $2.95, or 22 percent, to $10.25 after trading as low as $6.68.
Lehman Brothers Holdings Inc. fell $2.87, or 16.6 percent, to $14.43 as traders fretted that the No. 4 investment bank will succumb to soured debt.
Citigroup Inc., also struggling with the consequences of failed mortgages, announced it will sell its German retail banking operation to France's Credit Mutuel for $7.7 billion.
Citi slipped 9 cents to $16.19 after saying it will book a $4 billion gain from the sale, which is part of a plan by Chief Executive Vikram Pandit to sell up to $500 billion in assets to help boost profitability.
In economic news, the United States' trade deficit narrowed in May as exports -- including industrial supplies and consumer goods -- climbed to all-time highs. The Commerce Department said growing exports drove the trade gap down to $58.8 billion, a 1.2 percent decrease from April and the best showing since March.