CORRECT: Stocks Hit; Dow Off 300 Points On Credit Market Anxiety
(This is an update to correct a previous version. The market is now pricing in a Fed rate cut.)
NEW YORK (MarketWatch) - Amid heightened anxiety about shaky credit markets and the troubled housing sector, stocks slumped sharply lower Thursday, pushing the Dow Jones Industrial Average down nearly 300 points.
"We're seeing panic in the market today - you can almost cut the level of fear with a knife," said Al Goldman, chief market strategist at AG Edwards.
The Dow Jones industrials fell 328 points to 13,456, with 29 of its 30 components trading lower, just off the days' low of 13,462. The Dow was on track to post its biggest plunge since February.
"But there's nothing new. It's everything the market has been living with, and living beyond, for five months," said Goldman, who chalked up Thursday's slide to a "very normal and nasty pause to reflect" on the recent run-up, which drove the Dow up over 14,000. "
Aluminum producer Alcoa Inc. led the declines, its stock off 5.9%, with fellow Dow component Exxon Mobil Corp. following suit, its stock down 4.9%.
A weight on energy stocks, the oil goliath missed its profit target for the first time in more than a year.
On their heels was Citicorp Inc. , which fell 4%.
The S&P 500 declined 33 points to 1,484.3, while the Nasdaq dropped 58 points to 2,5892.
At the New York Stock Exchange, trading curbs were applied to prevent big moves that might clog its system.
1.6 billion shares were traded, while nearly 1.5 billion were exchanged on the Nasdaq. Declining issues topped advancers 15-1 on the NYSE and by 6-1 on the Nasdaq.
With worries about credit quality and availability mounting, futures markets are once again pricing in a rate cut by the Federal Reserve by the end of the year. The federal funds futures market at the Chicago Board of Trade now sees a 96% chance of a rate cut by Dec. 31, up from about 47%.
Credit worries persist
Credit market worries, along with the concerns about energy prices and the housing sector dominating, with transportation , financial and airline stocks among the hard-hit sectors.
"Ongoing credit concerns continue to weigh on equity," said Mike Malone, trading analyst at Cowen & Co. "You've had a series of announcements in the last several sessions which have continued to raise concerns in regards to the credit markets. Easy money is drying up."
The release of housing data offered added worries for the housing market, as well as ongoing concern about the potential impact on the economy at large.
The new home sales report, offered a tally of 834,000 homes sold last month, lower than the expected 890,000. The official count represents a 6.6% decline from 915,000 in May.
In addition, weak earnings reports from homebuilders like D.R. Horton Inc. and others helped keep the concerns about real estate in view. D.R. Horton, reportedly quarterly losses of $823.8 million, or $2.62 a share, from net income of $292.8 million, or 93 cents a share, for the year-ago quarter. Its stock was down 3.9%.
The latest durable goods report showed an overall drop in capital spending last month that was offset by heavy demand for airplanes. Orders increased 1.4%, but fell 0.5%, excluding planes.
The Labor Department reported that jobless claims dropped unexpectedly last week by 2,000 to 301,000, the lowest level since the week of May 12. MarketWatch had expected an increase of 9,000 claims.
Earnings news
Chemical giant Dow Chemical Co. reported its net income rose to $1.04 billion, or $1.07 a share, from $1.02 billion, or $1.05 a share, earned in the year-earlier second quarter, while sales climbed 6% to $13.27 billion from $12.51 billion. The results were above expectations.
Its stock fell 4.8%.
Apple Inc. stock shot up 7.3%. The company had a hefty 73% profit rise on sales of Macintosh computers. It forecst that it will have sold 1 million iPhones by the end of its fiscal fourth quarter.
Bristol-Myers Squibb increased its annual earnings outlook, the mid-point of its new range was below Wall Street expectations.
There was a spot of bright news for the embattled auto sector. Ford Motor made its first profit in two years and confirmed it's looking to sell Jaguar and Land Rover. The stock was up 3.2%.
Other markets
The front-month crude futures contract gained 1.4% at $77, extending the prior day's gains and adding to the nervousness in the stock market.
The U.S. dollar tumbled against the yen, as investors sought refuge from global concerns about credit markets poured money into the Japanese currency. The dollar fell 1% against the yen, and was little changed against the euro.
Gold futures dropped below $670 an ounce, their lowest level in more than a week.
Treasury-bond prices rallied, pushing the benchmark yield down to its weakest level since late May, amid investor nervousness about shakiness in credit markets. The 10-year note gained 24/32 to 97-21/32 with a yield of 4.806%.
Despite setbacks this week for several major debt offerings connected to multi-billion dollar leveraged buyouts for Chrysler Corp. and others, stocks managed to close with solid gains on Wednesday. Investors snapped up shares of Amazon.com and Boeing Co. following earnings reports from the firms.
By Kate Gibson