TBO.com - TBO is Tampa Bay Online

Stocks End Week In Another Nose Dive

ADVERTISEMENT

The Associated Press

Published: August 4, 2007

Updated: 08/03/2007 10:11 pm

NEW YORK - Wall Street plunged anew Friday, hurtling the Dow Jones industrial average down more than 280 points after comments from a major investment bank exacerbated the market's fears of a widening credit crunch.

The drop of more than 2 percent in major stock-market indexes was a fitting end to two volatile weeks on Wall Street and came after back-to-back, late-day, triple-digit gains in the Dow. This time, the catalyst for a sharp skid was Bear Stearns Cos. Chief Financial Officer Sam Molinaro, who described turmoil in the credit market as the worst he had seen in 22 years.

Stocks started the day with a decline after the government said jobs growth was not as strong as expected last month and a trade group reported that the nation's service sector grew at a slower pace than expected in July.

Then credit concerns, which have dogged investors for months and have roiled markets since last week, further weighed on investor sentiment. Standard & Poor's Ratings Services lowered its credit outlook on Bear Stearns to negative from stable because of the investment bank's exposure to the distressed mortgage and corporate buyout markets.

'I think there is a tremendous amount of uncertainty with regard to the credit markets and how the situation will ultimately settle,' said Mike Malone, trading analyst at Cowen & Co.

The Dow fell 281.42, or 2.09 percent, to 13,181.91. As has been typical in recent sell-offs, much of the decline came late in the session. The Dow lost more than 100 points in the final 15 minutes Friday. Despite the day's loss, the index was off only 0.63 percent for the week.

Broader stock indicators also fell sharply Friday. The Standard & Poor's 500 index dropped 39.14, or 2.66 percent, to 1,433.06, and the Nasdaq composite index fell 64.73, or 2.51 percent, to 2,511.25. For the week, the S&P fell 1.77 percent and the Nasdaq fell 1.99 percent.

The concerns have pulled stocks from highs seen only weeks ago. The Dow, which on July 19 closed above 14,000 for the first time, now sits about 819 points below that level. That 5.9 percent decline puts the Dow more than halfway toward the technical threshold of a correction, which is 10 percent.

Small Caps Hit Hard

Small-capitalization stocks were hit hard again Friday, partly because the global economy appears to be growing faster than that of the United States. Investors often contend profits at larger companies are more likely to hold up amid a U.S. slowdown because much of their business is drawn from overseas. The Russell 2000 index of small-capitalization stocks fell 28.57, or 3.64 percent, to 755.42.

The session also saw a notable rise in the bond market, as investors fled to the relative safety of fixed-income investments. The yield on the benchmark 10-year Treasury note fell to 4.68 percent from 4.77 percent late Thursday. Bond prices move opposite yields.

The unease over the mortgage market and tightening credit Friday again dragged down financial stocks, which have been hard hit in recent weeks.
Bear Stearns fell $7.28, or 6.3 percent, to $108.35. Investors also fled lenders. American Home Mortgage Investment Corp. confirmed late Thursday that it had stopped taking mortgage applications and is laying off most of its 7,000 staff members. American Home dropped 76 cents, or 52 percent, to 69 cents.

Countrywide Financial Corp. fell $1.77, or 6.6 percent, to $25. The nation's biggest mortgage lender said late Thursday that it has adequate access to cash and is not facing the liquidity crunch that is hitting dozens of other smaller players.

In economic news, which did not provide much reason for investors to look past the mortgage and credit concerns, the Labor Department said nonfarm payrolls rose 92,000 last month, less than the 132,000 jobs created in June and below the average forecast of about 135,000. Also, unemployment ticked up to 4.6 percent - a six-month high - from 4.5 percent in June. Still, overall unemployment remains low, analysts noted.

The Institute for Supply Management said its nonmanufacturing index, which measures service sector activity, fell in July to 55.8 from 60.7 in June. Wall Street expected a 59, according to Thomson Financial/IFR.

Crude oil futures settled down $1.38 at $75.42 per barrel on the New York Mercantile Exchange after the employment report suggested the economy could slow and demand for oil could fall.

Declining issues outnumbered advancers by about 5-to-1 on the New York Stock Exchange, where volume came to 2.11 billion shares, compared with 1.15 billion traded Thursday.

Catalina Reports Earnings

In another earnings report, Catalina Marketing Corp., the St. Petersburg-based marketing services company, said it earned $3.7 million, or 8 cents a share, on $117.2 million in sales for the quarter ended June 30, 2007. In comparison, the company earned $14 million, or 30 cents a share, on $105.2 million in sales for the same quarter a year ago.

The company said the most recent quarterly results include one-time costs of $10 million related to the upcoming sale of Catalina Marketing Corp. to Hellman & Friedman. Catalina shares rose 37 cents Friday to $31.26.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT