Stocks dip as worries about lenders persist
NEW YORK » Wall Street extended its slump into yet another week yesterday as investors worried that even a safety net set up for mortgage financiers Fannie Mae and Freddie Mac won't head off further troubles in the financial markets.
Investors' latest unease about the banking sector comes in a week when many financial names are to issue quarterly reports -- many of which will likely include sizable write-downs of souring mortgage debt.
The Treasury and the Federal Reserve said Sunday they would aid Fannie Mae and Freddie Mac if needed. They together hold or back $5.3 trillion of mortgage debt, about half the outstanding mortgages in the U.S.
Investors worried about a run on IndyMac Bancorp Inc. that led to the bank's takeover by the government Friday. IndyMac is the largest regulated thrift to fail.
Trading in shares of regional bank National City Corp. was briefly halted as the company responded to rumors of financial troubles. The bank said in a statement it is experiencing "no unusual depositor or creditor activity" and that as of Friday's close it had more than $12 billion of excess short-term liquidity.
The rumors and sell-off of regional banks reflect the unease investors have about where financial troubles might emerge.
"My sense is that investors are taking a pretty cautious stance," said Jack A. Ablin, chief investment officer at Harris Private Bank in Chicago. "The government can't bail out the whole industry."
The Dow Jones industrial average fell 45.35, or 0.41 percent, to 11,055.19 after spiking nearly 140 points in early trading.
Broader stock indicators also dropped yesterday. The Standard & Poor's 500 index fell 11.19, or 0.90 percent, to 1,228.30, and the Nasdaq composite index fell 26.21, or 1.17 percent, to 2,212.87.
The Russell 2000 index of smaller companies fell 10.45, or 1.55 percent, to 664.50.
Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where volume came to 1.41 billion shares.
Bond prices jumped as investors sought the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its yield, fell to 3.86 percent from 3.96 percent late Friday.
The dollar was mixed against other major currencies, while gold prices jumped.
Light, sweet crude settled up 10 cents at $145.18 a barrel on the New York Mercantile Exchange.
Fannie Mae fell 52 cents, or 5.1 percent, to $9.73, while Freddie Mac fell 64 cents, or 8.3 percent, to $7.11.
National City fell 65 cents, or 14.7 percent, to $3.77.
Other banks declined, too: Washington Mutual Inc. fell $1.72, or 34.8 percent, to $3.23.
The renewed concerns about the financial sector come in what is expected to be a busy week for corporate news, with a steady stream of quarterly results due from names like Intel Corp., Cola-Cola Corp., Microsoft Corp. and Citigroup Inc.