Stocks fall on worries about financial sector
NEW YORK » Wall Street tumbled yesterday as worries about further trouble in the financial sector, higher unemployment and lackluster sales at retailers touched off fresh concerns about the economy. The Dow Jones industrials skidded nearly 225 points, while bond prices shot higher as investors once again sought the safety of government debt.
The market's pullback erased most of the 370-point gain the Dow logged the two prior sessions and perhaps shows the lack of solid conviction behind many of the investors' recent bets.
Heading investors' list of worries, insurer American International Group Inc. reported a loss of more than $5 billion for the second quarter and the U.S. Labor Department said the number of newly laid off people seeking jobless benefits last week jumped to its highest level in more than six years. Weak sales reports from Wal-Mart Stores Inc. and other retailers added to investors' unease.
Meanwhile, an announcement by the credit-ratings agency Moody's Investors Service that it placed the long-term ratings of credit card lender American Express Co. on review for possible downgrade added to investors' jitters.
The Dow fell 224.64, or 1.93 percent, to 11,431.43.
Broader indicators also slid yesterday. The Standard & Poor's 500 index fell 23.12, or 1.79 percent, to 1,266.07, and the Nasdaq composite index fell 22.64, or 0.95 percent, to 2,355.73.
Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where volume totaled 1.28 billion shares compared with 1.2 billion shares traded Wednesday.
The Russell 2000 index of smaller companies fell 12.49, or 1.72 percent, to 713.41.
Oil prices that fell sharply earlier in the week rebounded yesterday, likely adding to Wall Street's downbeat mood. Light, sweet crude rose $1.44 to settle at $120.02 on the New York Mercantile Exchange.
Bonds jumped as investors sought the protection of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its prices, fell to 3.93 percent from 4.05 percent late Wednesday. The dollar mostly rose against other major currencies, while gold prices fell.
The Labor Department said the number of newly laid off people seeking jobless benefits increased by a seasonally adjusted 7,000 to 455,000 last week, the highest level since late March 2002. Wall Street had expected new claims to rise to around 430,000.
American International Group fell $5.25, or 18 percent, to $23.84 after the company reported its loss and said weakness in the credit markets has erased several billions of dollars in value from its credit default swaps portfolio and other investments.
American Express fell $1.59, or 4.2 percent, to $36.40 after the Moody's announcement.
Wal-Mart, the world's largest retailer, fell $3.80, or 6.3 percent, to $59.96.