Wall Street skidded lower in another erratic session today as investors worried that the tumbling economy may not only cripple mortgage...
NEW YORK — Wall Street skidded lower in another erratic session today as 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, reflecting uneasiness about tech stocks after AT&T’s news, declined 58.95, or 2.4 percent, to 2,440.51.
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Late in the day, the chief executive of AT&T, speaking at a conference, said the phone company was seeing some slowdown in its consumer businesses, though not in wireless. That was the last straw for the market, sending stocks and the major indexes tumbling.
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 Countrywide and KB Home, which posted a disappointing fourth-quarter loss, kept Wall Street on edge throughout the day, and comments by President Bush reiterating the problems facing the economy likely added to the market’s uneasiness.
Many traders have been betting recently that Countrywide might need to file for bankruptcy protection. Countrywide denied that rumor today, but its stock still plunged 28 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.
Investors tried to take the market higher at many points during the day but eventually succumbed to another stream of bad news. All three indexes are down substantially so far this year, 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.
The day’s abortive advance was due in part to rising hopes that the Federal Reserve, seeing the same bleak economic numbers as Wall Street, will continue its campaign of rate cuts to prevent a recession. The Fed meets Jan. 29-30.
“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.”
Bond prices showed little movement. The yield on the benchmark 10-year Treasury note, which moves opposite its price, stood at 3.84 percent, flat with late Monday.
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?”
Last week’s Labor Department report showing a rise in unemployment to 5 percent and meager job growth suggested to Wall Street that it had been too confident last year in the economy’s ability to shake off a sinking housing market.
Philadelphia Fed President Charles Plosser said in a speech that the central bank remains open to further rate reductions but that inflation remains a concern.
Gold prices surpassed their 1980 levels and reached a record above $880 an ounce today on the New York Mercantile Exchange, while crude prices resumed their climb, rising $1.24 to $96.33 a barrel.
The dollar fell against most rival currencies, except the yen.
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.
Countrywide fell $2.17, or 28 percent, to $5.47.
KB Home fell $1.70, or 9.2 percent, to $16.78.
AT&T fell $1.87, or 4.6 percent, to $39.16.