TBO.com - TBO is Tampa Bay Online

Housing Fears Dampen Markets

ADVERTISEMENT

By TIM PARADIS, The Associated Press

Published: November 20, 2007

NEW YORK - Markets resumed their slide Monday as Wall Street absorbed a gloomy outlook for the banking sector, as well as bleak news from the National Association of Home Builders.

The major stock market indexes each fell more than 1.5 percent, with the Dow Jones industrial average giving up more than 200 points.

Concerns about the banking sector dominated the session. Goldman Sachs Group's downgrade of large banks, and its estimate that Citigroup would have to write down $15 billion because of its exposure to risky debt during the next two quarters unnerved Wall Street.

Other sectors suffered big hits during the session, including airlines and automakers.

Housing stocks also suffered. The worry on Wall Street is that the housing market is getting so weak it will crimp consumer spending, which until now has helped keep the economy afloat. Ahead of the holiday shopping season, any signs that Americans are pulling back could prevent a rally in December.

November's housing forecast from the homebuilders group remained unchanged at its lowest-ever level even after October's figure was revised to 19 from 18. Economists polled by Thomson/IFR had expected the index would come in at 18. The survey began in 1985.

Trying To Get A Handle On It

"I think that a lot of folks are digesting the news from last week, and they're worried about the economy and the ability to grow earnings at the larger companies in America," said Rob Lutts, chief investment officer at Cabot Money Management in Salem, Mass.

The Dow industrials fell 218.35, or 1.66 percent, to 12,958.44.

Broader stock indicators also declined. The S&P 500 index fell 25.47, or 1.75 percent, to 1,433.27, and the Nasdaq composite index fell 43.86, or 1.66 percent, to 2,593.38.

The Russell 2000 index of smaller companies fell 19.15, or 2.49 percent, to 750.35. The pullback left the index firmly in negative territory for the year, with a decline of 4.74 percent. Investors often view smaller companies as more likely to be hit hard in a slowing economy, because they can't as easily get by on thin profit margins as some big companies with big overseas operations.

With Monday's decline, stocks have seen losses in seven of the past eight sessions. Last week, stocks finished higher after a string of volatile sessions. The Dow ended up 1.03 percent for the week, and the S&P 500 index and the Nasdaq both finished up 0.35 percent.

Government bond prices rose sharply Monday as investors sought safety. The yield on the 10-year Treasury note fell to 4.08 percent from 4.15 percent late Friday. The 10-year note hasn't gone below the 4.1 percent level since September 2005.

January's contract for crude oil futures rose 80 cents to settle at $94.64 a barrel on the New York Mercantile Exchange.

John Merrill, chief investment officer at Tanglewood Capital Management in Houston, contends investors are still grappling with the scope of the write-downs related to the housing market and related ramifications of a housing slowdown, such as a more cautious consumer.

"Certainly, in the financial sector the concerns seem to be never-ending. The potential for write-offs seems to keep growing," he said. "This is having to settle in and the process of settling in means you become more aware of how more meaningful and how restricting these write-downs are."

Citigroup Write-Downs Worrisome

One big area of concern for investors was again Citigroup, which said this month it would likely write down $8 billion to $11 billion in the fourth quarter. The bank fell $2, or 5.9 percent, to $32 after the Goldman downgrade to a "sell" rating.

Lowe's Cos. posted a 10 percent dip in third-quarter profit Monday, slightly better than expected. The Mooresville, N.C.-based home improvement retailer lowered its forecast in anticipation of further deterioration in housing. Lowe's fell $1.89, or 7.6 percent, to $23.12.

Celgene's announcement late Sunday that it agreed to buy Boulder, Colo.-based Pharmion Corp. for $72 a share in a cash-and-stock deal worth $2.9 billion failed to bring much enthusiasm to Wall Street. Summit, N.J.-based Celgene Corp. fell 90 cents to $64, while Pharmion rose $15.84, or 32 percent, to $65.12.

Meanwhile, other sectors that could be bruised by an economic slowdown fell Monday. Among homebuilders, Lennar Corp. fell $1.67, or 8.7 percent, to $17.57 and hit a fresh 52-week low of $17.54. Its previous low was $18.90. Pulte Homes Inc. fell $1.04, or 8.1 percent, to $11.80. It likewise sank to a fresh 52-week low of $11.76; the previous low was $12.15.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT