Stocks plunge 2% as subprime mortgage woes deeepen
NEW YORK (AP) ? Stocks plunged Tuesday as troubles for subprime lenders kept piling up and U.S. retail sales came in weaker than anticipated, leading investors to brace for a wilting economy. The Dow Jones industrials fell more than 200 points.
At the close of trading, the Dow fell 242.98, or 2%, to 12,075.96. Broader stock indicators also fell. The Standard & Poor's 500 index fell 23.66, or 2%, to 1377.94, and the Nasdaq composite index slid 51.72, or 2.2%, to 2350.57.
SUBPRIME WOES: Meltdown continues
Volume on the New York Stock Exchange, where declining issues outnumbered advancers by more than 4 to 1, was high at 1.56 billion shares.
Trading collars were triggered Tuesday afternoon when the New York Stock Exchange Composite index lost more than 180 points. The collars put a chokehold on certain orders, forbidding transactions that capitalize on discrepancies in prices.
Investors fled the already deflated stocks of subprime mortgage lenders as the sector's problems mounted.
The New York Stock Exchange said shortly before the opening bell it would immediately suspend trading in shares of New Century Financial and move to delist the stock. The lender, which saw trading in its shares halted throughout Monday's session, on Tuesday disclosed more details on the raft of financial hurdles it faces.
Word from Accredited Home Lenders Holding that it is grappling with a liquidity shortfall also bolstered concerns that the sector's troubles are widespread, as did a report from the Mortgage Bankers Association, which showed that mortgage delinquencies and foreclosures climbed in the last quarter of 2006.
"The market's still jittery, and they're starting to get full-blown concerns over a bleed in the larger subprime mortgage market," said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds.
He noted that the subprime market is a relatively small sector of the U.S. economy, but that Tuesday's selling was accentuated by options expiring and increased volatility since the market's big tumble in late February ? a drop that was caused partially by the problems of subprime lenders, who loan to people with poor credit.
The market was also worried Tuesday about retailers, which the Commerce Department said eked out a meager 0.1% rise in sales last month. The data overshadowed a profit report from Goldman Sachs Group that came in well above Wall Street's forecast.
The worries surrounding subprime lenders and sluggish retail sales drove up bond prices. The yield on the benchmark 10-year Treasury note fell to 4.50% from 4.56% late Monday. Gold prices fell.
Tuesday's economic data didn't offer much support for bullish investors. The Commerce Department said sales at U.S. retailers rose 0.1% in February as wintry weather in much of the country kept shoppers away from stores. Investors had expected an increase of 0.3% from January.
"I think a big question mark on this is how much of this is weather-related," said Rob Lutts, chief investment officer at Cabot Money Management. "We had two or three days during the month which knocked out activity. ... I think it is causing a little bit of alarm short-term."
Several retailers fell moderately following the Commerce Department's report.
Meanwhile Tuesday, New Century said regulators subpoenaed documents under inquiries into accounting errors that inflated the value of the company's loan portfolio. The Irvine, Calif., company said the Securities and Exchange Commission and the U.S. Attorney's Office for the Central District of California began the investigations two weeks ago.
Accredited Home shares plunged after it disclosed its own liquidity problems.
Investors trying to determine the breadth of the problems in the subprime sector pounced on comments from Goldman Sachs. The investment bank said strength remained in mortgages and credit products during the quarter and that while the subprime sector showed "significant weakness," the broader credit environment "remained strong."
Goldman Sachs rose after posting a best-ever first-quarter profit amid strong revenue from trading and investment banking.
The Mortgage Bankers Association's quarterly report on the mortgage market didn't surprise most investors, but confirmed their worries that the sector is struggling. Late mortgage payments soared to a 3 1/2-year high in the fourth quarter of last year, and new foreclosures hit a record high.
Light, sweet crude fell 98 cents to $57.93 per barrel on the New York Mercantile Exchange.
Overseas, Japan's Nikkei stock average fell 0.7%. Britain's FTSE 100 fell 1.2%, Germany's DAX index fell 1.4%, and France's CAC-40 fell 1.15%.
Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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