Wall Street tumbles, led by financials
Thursday July 24, 4:33 pm ET
By Kristina Cooke
The Dow fell the most in a month, as the rising price of oil compounded worries about the economy. The jump in crude spurred unease that the recent sharp declines may have run their course. Shares of companies particularly vulnerable to higher fuel costs, such as airlines and retailers, sank.
Financial companies, which have been incurring huge losses from the housing slump, slid after the data from the National Association of Realtors showed June sales of existing homes hit a 10-year low. An index of bank stocks (Philadelphia:^BKX - News) fell 6.7 percent -- after rising about 40 percent over the past week.
Trading has been very volatile in recent weeks and the market has been on tenterhooks, given a flood of serious setbacks stretching from a high-profile bank failure to the cobbling together of a last-minute rescue plan of the two pillars of the U.S. housing market-- Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News). The plan was passed by the House on Wednesday night, and is expected to be approved by the Senate on Saturday.
"The bailout plan restored enough confidence in the sector to take some pressure off the stocks, but the pretty nice bounce we saw seems to have run its course," said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.
"When people take another look at the underlying economics, they see that the overhang in housing has gotten a bit worse."
The Dow Jones industrial average (DJI:^DJI - News) fell 283.10 points, or 2.43 percent, to close at 11,349.28. The Standard & Poor's 500 Index (^SPX - News) slid 29.65 points, or 2.31 percent, to 1,252.54, while the Nasdaq Composite Index (Nasdaq:^IXIC - News) shed 45.77 points, or 1.97 percent, to 2,280.11.
Shares of mortgage finance companies Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News) fell more than 18 percent, just a day after the House approved the housing rescue package that would include a U.S. government lifeline for the two companies.
Fannie Mae's stock lost nearly 20 percent to $12.02, while
Freddie Mac's stock was down 18.4 percent at $8.81.
Other financial shares also fell. Citigroup (NYSE:C - News) shed 9.8 percent to $19.06 and Goldman Sachs Group (NYSE:GS - News) fell 4.1 percent to $180.26.
Bill Gross, chief investment officer of PIMCO, said the U.S. housing market faces $1 trillion in losses. The manager of the world's biggest bond fund said in his investment letter the best way to help the ailing U.S. housing market recover would be to cut the cost of mortgages via the U.S. housing bill and rescue package for the mortgage finance companies.
Home builder Ryland Group's (NYSE:RYL - News) shares fell 19.1 percent to $21.43 after reporting a wider-than-expected loss late on Wednesday. The Dow Jones home construction index (DJI:^DJUSHB - News) fell 12.5 percent.
Ford (NYSE:F - News) shares fell 15.3 percent to $5.11 on the New York Stock Exchange after the automaker posted a wider-than-expected loss on declining sales of pickup trucks and sport utility vehicles (SUVs) in North America.
Dow Chemical said its profit missed Wall Street's expectations as it grappled with higher energy prices. Its stock fell 3.3 percent to $33.11 on the NYSE.
Adding to the negative tone were brokerage downgrades on three Dow components.
U.S. aircraft company and defense contractor Boeing's shares fell 6.3 percent to $62.53 after Citigroup and Sanford Bernstein cut their price targets on Boeing, while Cowen & Co slashed its rating on the stock. Shares of AT&T, the largest U.S. telecommunications company, dropped 4.1 percent to $31.70 after JPMorgan cut its rating to "neutral" from "overweight." McDonald's stock dropped 2.2 percent to $58.37 after Deutsche Bank downgraded the world's largest fast-food chain's stock, according to theflyonthewall.com, a financial Web site.
Apart from the housing data, another economic report on Thursday showed a larger-than-expected rise in the number of Americans filing for jobless benefits in the latest week, adding to concerns about a slowing labor market.
U.S. oil futures rose $1.05 to settle at $125.49 a barrel after a drop of more than 5 percent over the previous two sessions. Earlier during Thursday's NYMEX session, oil hit an intraday high above $126.
An index of retail stocks (Chicago Options:^RLX - News) fell 2.3 percent, while an index of airline stocks (AMEX:^XAL - News) plunged 11.1 percent.
Apple Inc (NasdaqGS:AAPL - News), the maker of the iPod and iPhone, led the Nasdaq's major decliners, falling 4.4 percent to $159.03.
Trading was moderate on the New York Stock Exchange, with about 1.64 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 2.55 billion shares traded, above last year's daily average of 2.17 billion.
Declining stocks outnumbered advancing ones by 4 to 1 on the NYSE and by 2 to 1 on the Nasdaq.
