Wall Street surrendered again today to investors' anxiety about the financial sector, sending the Dow Jones industrials back into bear market...
NEW YORK — Wall Street surrendered again today to investors’ anxiety about the financial sector, sending the Dow Jones industrials back into bear market territory. The flight from equities sent investors into safe-haven bets like Treasury bonds.
The Dow Jones industrial average fell 239.61, or 2.1 percent, to 11,131.08.
Microsoft, one of the 30 Dow stocks, declined 66 cents to close at $25.50 a share. Boeing, also a Dow stock, fell $1.49 to $62.34.
Broader stock indicators also fell. The Standard & Poor’s 500 index declined 23.39, or 1.9 percent, to 1,234.37, and the Nasdaq composite index fell 46.31, or 2 percent, to 2,264.22.
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Bond prices jumped as investors again sought the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.02 percent from 4.10 percent late Friday.
Financials that had rallied in recent weeks after logging huge declines, suffered from the same worries about souring debt that caused an abrupt end to their run-up late last week. Wall Street is concerned that a further withering of the housing and credit markets will damage bank balance sheets.
An International Monetary Fund report added to some of the stress in the market. The IMF predicted continuing problems in the credit and housing market that will continue to hurt the financial industry. It said, “at the moment a bottom for the housing market is not visible.”
Frederic Dickson, chief market strategist at D.A. Davidson & Co., said investors are still trying to get a longer-term view on the stability of the banking industry, particularly the regional banks.
“Corporate depositors and individual depositors are looking at balances at individual financial institutions. I think that’s unsettling some of the banks.”
On Friday, federal officials closed branches of the 1st National Bank of Nevada and First Heritage Bank — owned by Scottsdale, Ariz.-based First National Bank — adding to investors’ jitters about the ability of some banks to stay afloat.
Today’s pall over the market wasn’t solely because of flagging confidence in the financial sector. Investors are also waiting to see whether the sharp drop in the price of oil of recent weeks has come to an end, or is just pausing. Light, sweet crude rose $2.23 to settle at $123.26 on the New York Mercantile Exchange.
The troubles that banks are having with bad debt underscore the difficulty that consumers are facing not only in keeping on top of their mortgages but also making their credit card and car payments. That is leading to worries about the broader economy. Investors should get some insight with big economic reports due at the end of this week.
On Thursday, investors will be looking for the first report on gross domestic product for the second quarter. Economists polled by Thomson Financial/IFR expect the Commerce Department to report that gross domestic product rose, thanks in part to the government’s tax rebate checks.
Then, on Friday, Wall Street will be awaiting the employment report for June. Often such reports are regarded as the most important economic readings of the month because of the insight into the well-being of the consumer. Their health is important because consumers account for more than two-thirds of U.S. economic activity. The latest Labor Department report is expected to show the seventh month of jobs losses and that the unemployment rate ticked higher.
Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams, said investors were selling off financial shares because of their continued concerns about housing.
“They’re taking the financials to the woodshed,” he said. “Until the housing market stabilizes you’re really not going to see the financials stabilize.”
Among financials, Citigroup fell $1.42, or 7.5 percent, to $17.43, while Morgan Stanley declined $1.79, or 4.9 percent, to $34.96.
The other corporate news today wasn’t enough to support the market. Verizon Communications said its second-quarter profit rose 12 percent, although revenue came in short of Wall Street’s forecasts. The company, one of the 30 that comprise the Dow industrials, made some investors uneasy after customers disconnected their landlines faster than before. Verizon fell 85 cents, or 2.5 percent, to $33.60.
Amgen surged $6.56, or 12.2 percent, to $60.48 after the company reported positive trial results for its osteoporosis drug candidate denosumab. Late-stage clinical trial results showed denosumab reduced the incidence of fractured vertebrae in post-menopausal women. The stock tacked on another 2 percent in after-hours trading after it reported second-quarter profit surpassed projections.
Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where volume came to 1.17 billion shares.
The Russell 2000 index of smaller companies fell 14.23, or 2 percent, to 696.11.
Overseas, Japan’s Nikkei stock average rose 0.1 percent. Britain’s FTSE 100 fell 0.8 percent, Germany’s DAX index fell 1.3 percent, and France’s CAC-40 declined 1.2 percent.