Dow plunges 240 on financial-sector fears
NEW YORK » Wall Street again surrendered to investors' anxiety about the financial sector yesterday, sending the Dow Jones industrials down 240 points and back into bear market territory. The flight from equities sent investors into safe-haven bets like Treasury bonds.
Financials that had rallied in recent weeks after logging huge declines, suffered from the same worries about souring debt that caused an abrupt end to their run-up late last week. Wall Street is concerned that a further withering of the housing and credit markets will damage bank balance sheets.
An International Monetary Fund report added to some of the stress in the market. The IMF predicted continuing problems in the credit and housing market that will continue to hurt the financial industry. It said, "at the moment a bottom for the housing market is not visible."
The Dow Jones industrial average fell 239.61, or 2.11 percent, to 11,131.08.
Broader stock indicators also declined. The Nasdaq composite index also fell into bear market territory, shedding 46.31, or 2.00 percent, to 2,264.22. The Standard & Poor's 500 index declined 23.39, or 1.86 percent, to 1,234.37; it has been in bear territory for the past few weeks.
Bond prices jumped as investors again sought the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.02 percent from 4.10 percent from late Friday.
The dollar was mixed against other major currencies, while gold prices fell.
Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where volume came to 1.17 billion shares.
The Russell 2000 index of smaller companies fell 14.23, or 2.00 percent, to 696.11.
Light, sweet crude rose $1.47 to settle at $124.73 on the New York Mercantile Exchange.
Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams, said investors were selling off financial shares because of their continued concerns about housing.
"They're taking the financials to the woodshed," he said. "Until the housing market stabilizes you're really not going to see the financials stabilize."
Among financials, Citigroup Inc. fell $1.42, or 7.5 percent, to $17.43, while Morgan Stanley declined $1.79, or 4.9 percent, to $34.96.
Verizon Communications Inc. said its second-quarter profit rose 12 percent, although revenue came in short of Wall Street's forecasts. The company, one of the 30 that comprise the Dow industrials, made some investors uneasy after customers disconnected their landlines faster than before. Verizon fell 85 cents, or 2.5 percent, to $33.60.
Kraft, the maker of Velveeta, Oreo cookies and Maxwell House coffee, said higher prices helped offset rising commodity costs and listed second-quarter earnings nearly 4 percent. The company rose $1.45, or 4.9 percent, to $30.83 after raising its forecast for the year.