U.S. Stocks Open Firmly Lower With Financial Jitters Back In Play
NEW YORK (MarketWatch) -- U.S. stocks opened firmly lower Thursday as nervousness about distress at mortgage-giants Fannie Mae and Freddie Mac returned to the fore and fresh concerns emerged about investment firm Lehman Brothers.
The Dow Jones Industrial Average was down 67 points, or 0.6%, at 11,353 in early morning trading, with 27 of its 30 components opening lower.
The S&P 500 index dipped 5 points to 1,268, while the Nasdaq Composite lost 12 points to 2,376.
Amid continued expectations that the government may bail-out Fannie Mae and Freddie Mac , the shares of the two mortgage lenders continued to slide, with the former down 5.7% and the latter off 11%.
"Talk about Freddie and Fannie nationalization has helped keep mortgage spreads wide and illiquid, which together with a renewed decline in the dollar and a parallel rebound in commodities supports a defensive tone in equities," said Lena Komileva, an economist at Tullett Prebon.
Shares of Lehman Brothers also came under pressure, and were off 7% in the early morning.
The Wall Street Journal reported the Federal Reserve had investigated a rumor that Credit Suisse pulled a credit line from Lehman Brothers . The newspaper said the Fed was told by the Swiss bank that the rumor was false.
Separately, Citibank lowered its third-quarter earnings estimates for Lehman, along with those for Goldman Sachs and Morgan Stanley , citing asset write-downs, weaker client flows and seasonal slowdown.
Nervousness about financials put pressure on the dollar, with the dollar index -- which measures the U.S. unit against a basket of major currencies -down 0.7%.
Dollar weakness, meanwhile, gave a boost to dollar-denominated commodities such as crude oil, which gained 13 cents to $115.11 a barrel.
Other securities which traditionally serve as measures of risk were moving, with gold futures rising $20.70 to $837 an ounce.
On the economics calendar, the Labor Department said weekly initial jobless claims fell by 13,000 to a total of 432,000 last week. Separately, a Philadelphia-area poll of activity showed an improvement for August, while an index of U.S. leading indicators pointed to slower growth for the rest of 2008.
H.J. Heinz said annual earnings will be at the top end of forecasts, and Tech Data's profit more than tripled.
Limited Brands rose 9% after the clothing retailer and Victoria's Secret owner said its adjusted earnings came in better than analyst expectations.
But teen retailer Hot Topic dropped over 17% on a soft earnings outlook.
Results from fiber-optic equipment maker JDS Uniphase and Salesforce.com also fell short of forecasts, sending down both by more than 13%.
By Nick Godt