U.S. Stocks Drop As Financials, Mortgage Foreclosures Weigh
NEW YORK (MarketWatch) -- U.S. stocks dropped Thursday, with investors confronted by further bleak news from the financial sector, including word of a default at mortgage lender Thornburg Mortgage Inc. and Merrill Lynch & Co. down on news it's raising the conversion rates of some securities.
"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.
After down, the major stock indexes fell further after the Mortgage Bankers Association reported record home foreclosures as 2007 came to a close. .
After falling more than 150 points, the Dow Jones Industrial Average was more recently down 110.23 points to 12,144.76, with all but two of its 30 components trading lower, with blue-chip financials among the hardest hit.
JP Chase Morgan fell 3.2% and Citigroup Inc. declined 2.8%.
The S&P 500 dipped 13.80 points to 1,319.90 and the Nasdaq Composite dropped 11.26 points to 2,261.55.
Ahead of the open, stock futures retained their losses after the Labor Department reported weekly jobless claims numbers, which had the four-week average dropping to its lowest level since Feb. 9. .
In early trade, Merrill Lynch fell 6.1% after the brokerage hiked the conversion rate of some securities it is selling, a day after it said it was getting out of the subprime lending business and laying off 650 workers.
Ambac Inc. was off nearly 7% after news late Wednesday that the troubled bond insurer said it sell $1.5 billion in stock in an effort to keep its triple-A rating.
Thornburg Mortgage Asset Corp. said in a filing with the Securities and Exchange Commission that it failed to meet a margin call of about $28 million, triggering a string of cross-defaults.
On Wednesday, stocks found their footing late in the session amid strength in the technology sector, with the Dow Jones Industrial Average posting its first rise in five sessions.
The dollar dropped to an all-time low against the euro in early European trading, holding close to that level after the European Central Bank left its key rate on hold. Still ahead are the latest data on pending home sales and weekly jobless claims.
The euro climbed nearly 0.6% to $1.53352, 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 fell 42 cents to $104.10 a barrel after peaking at $105.97 earlier on.
Investors also have a raft of same-store sales figures in view, which could be the worst since 2003 amid increasing consumer fears about the economy. Of early releases, Limited Brands reported a 9% drop and Finish Line same-store sales dropped 6%.
Bucking the lower trend was Wal-Mart Stores Inc. , which reported a 2.6% rise in same-store sales excluding fuel, helped by strong international sales.
H&R Block narrowed its quarterly loss to $47.4 million from $60.3 million, after top-line growth in its tax-services business.
Carlyle Capital Corp., an investment fund managed by the Washington private-equity firm Carlyle Group, has also missed margin payments. The group said it's failed to meet margin calls from four counterparties and has already received one notice of default.
Meanwhile, 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.
Japanese stocks bounced back on gains for exporters. European indexes were slightly lower after the Bank of England and ECB left their rates unchanged. The French CAC 40 index lost 0.8%.
By Kate Gibson