U.S. Stocks Down Again As Financials Weigh
NEW YORK (MarketWatch) -- U.S. stocks thudded lower for a fifth session in six Thursday, pressured by more bleak news from the financial sector, including a default at mortgage lender Thornburg Mortgage Inc. and news that Merrill Lynch & Co. is opting out of the subprime mortgage market.
"The hits just keep on coming," said Robert Pavlik, chief investment officer at Oaktree Asset Management. "Trying to stay optimistic and long-term focused is extremely hard at this point, you don't know what's coming up."
In another triple-digit decline, the Dow Jones Industrial Average fell 185 points to 12,069, with all but one of its 30 components trading lower. Blue-chip financials were among the hardest hit.
J.P. Morgan Chase & Co. fell 3.4% and Citigroup Inc. declined 4.2%.
Off the Dow, Merrill Lynch was down 7% as the brokerage hiked the conversion rate of some securities it sells, a day after it said it was getting out of the subprime lending business and laying off 650 workers. .
The S&P 500 fell 25 points to 1,307 and the Nasdaq Composite lost 42 points to 2,230.
Volume on the New York Stock Exchange neared 1.1 billion, and declining stocks outpaced those advancing 4 to 1. On the Nasdaq, 641 million shares were exchanged, and for every stock on the rise, more than three were on the decline.
The euro climbed nearly 0.5% to $1.5361 Thursday, having peaked at $1.5347. The dollar also lost ground against the yen and hit a new low against the Swiss franc. .
Crude-oil prices gained 95 cents to close above $105 a barrel for the first time. The April contract finished the session at $105.47 after earlier hitting an all-time high of $105.97. .
"The dollar is getting crushed right now, and crude is not really off all that much. [It] seems like another instance of the long side paring back positions because of the worries in the equities markets," wrote Zachary Oxman, senior trader at Wisdom Financial Inc., in an early note.
The major stock indexes fell further after the Mortgage Bankers Association reported record home foreclosures as 2007 came to a close. .
"The housing data that just came out is very equity bearish, and we saw a huge acceleration in the sale of gold. I think that it's another case of traders/funds looking to get cash free," wrote Oxman.
In recent action on the New York Mercantile Exchange, gold fell $11.40 to end at $977.10 an ounce. .
Early data had initial filings for state unemployment benefits falling to their lowest levels since the latter half of January in the latest week, while continuing claims hit their highest mark since September 2005. .
And, the Federal Reserve reported Americans to be poorer at the end of 2007 than they were the previous year, with the net worth of U.S. households failing by $533 billion, or a 3.6% annual rate, in the fourth quarter. .
Financial follies
"It seems like there is no end to issues within the financial sector; it is the inability to stem the flow of negative news in terms of re-evaluating capital ... We're that much closer to zero now," said Owen Fitzpatrick, head of U.S. equity group at Deutsche Bank.
Ambac Inc. was off more than 12% after the troubled bond insurer said Wednesday it is selling $1.5 billion in stock in an effort to keep its triple-A rating.
Shares of Thornburg Mortgage Asset Corp. plunged, recently off 53%, with Fitch Ratings downgrading the company's default rating to "RD" from "CCC," citing its weakening credit profile.
Thornburg disclosed in a regulatory filing that it failed to meet a margin call of about $28 million, triggering a string of cross-defaults.
The news sent ripple effects through credit markets, boosting the safe-haven appeal of Treasury bonds. The benchmark 10-year bond gained 1% to 99.02, yielding 3.610%.
Washington Mutual Inc. declined 5.5% after Standard & Poor's Ratings Services downgaded its ratings, saying the actions "reflect our expectations for a more severe residential mortgage credit cycle than we had anticipated at the start of 2008."
At the same time, UBS may have sold a portfolio of Alt-A securities valued at 25 billion Swiss francs ($24.1 billion), according to an analyst at J.P. Morgan.
H&R Block narrowed its quarterly loss to $47.4 million from $60.3 million, after top-line growth in its tax-services business.
Mining
Mining equipment maker Joy Global Inc. rose nearly 6% after it reported a better-than-expected rise in quarterly earnings, citing strong demand from overseas.
The mining equipment maker is in "one of the few hot spots that is left," said Fitzpatrick.
Investors also studied a raft of same-store sales figures in view. Limited Brands reported a 9% drop and Finish Line same-store sales dropped 6%. But Wal-Mart Stores Inc. reported a 2.6% rise in same-store sales excluding fuel, helped by strong international sales.
Overseas, shares in Europe retreated on ongoing worries about the health of the credit markets , while Asian indexes rebounded. .
By Kate Gibson