Wall Street skidded lower in another fitful session Tuesday, with investors worried that the tumbling economy may not only cripple mortgage...
NEW YORK — Wall Street skidded lower in another fitful session Tuesday, with investors worried that the tumbling economy may not only cripple mortgage lenders like Countrywide Financial but also create problems for other companies like AT&T.
The Dow Jones industrials fell 238.42, or 1.9 percent, to 12,589.07, after ratcheting up and down through the day.
Microsoft, one of the 30 Dow stocks, sank $1.16 to close at $33.45 a share. Boeing, also a Dow stock, plummeted $2.96 to $79.91.
Broader stock indicators also sank. The Standard & Poor’s 500 index dropped 25.99, or 1.8 percent, to 1,390.19, and the Nasdaq composite index declined 58.95, or 2.4 percent, to 2,440.51.
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Investors tried to take the market higher at many points during the day, but eventually succumbed to another stream of bad news. The Dow and the Standard & Poor’s 500 index are down more than 5 percent so far this year and the Nasdaq composite index is down nearly 8 percent, having been pummeled since Jan. 1 on worse-than-anticipated readings on the economy.
That could mean that fourth-quarter earnings reports, which start pouring in later this week, may not meet already lowered expectations.
In the morning, the National Association of Realtors said its index tracking pending U.S. home sales fell 2.6 percent in November, a larger decline than the market expected. Jitters about the profitability of Countrywide and KB Home kept Wall Street on edge throughout the day, and President Bush reiterating the problems facing the economy likely added to the market’s uneasiness.
Many traders have bet recently that Countrywide might need to file for bankruptcy. Countrywide denied that rumor Tuesday, but its stock plunged 17 percent. Lehman Brothers said in a note that Countrywide’s earnings power has declined severely, and The New York Times reported the company fabricated documents related to the bankruptcy case of a Pennsylvania homeowner.
Late in the day, the chief executive of AT&T said at a conference that the phone company was seeing some slowdown in its consumer businesses, though not in wireless. That was the last straw for the market, and sent stocks tumbling.
“Anything that talks of contagion spreading to the general economy … will definitely spook the market,” said Joseph Battipaglia, chief investment officer at Ryan Beck, referring to the softness AT&T is seeing. “The Fed still has more work to do. They’re clearly cutting rates into economic weakness, which to many means that they’re somewhat behind the curve. And that’s a concern for investors.”
Recession fears have been thwarting stock-rally attempts so far this year, said Richard Sparks, senior equities analyst at Schaeffer’s Investment Research. “It’s difficult to balance the ability to cut rates to stave off a recession with the stated goal that the Fed has to not spur inflation. There’s a question out there — can the Fed do enough?”
Alcoa on Wednesday officially kicks off the fourth-quarter earnings season, which investors are pessimistic about.
“The picture doesn’t look good right now and the fear is that what we saw through the economic data points last week will be carried through to corporate earnings,” said Ryan Larson, senior equity trader with Voyageur Asset Management.