Stock Fall for Second Day On Worsening Housing Reports
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Stocks in America fell for a second day after Wells Fargo & Co. said the housing market is the worst since the Great Depression and investors speculated Fannie Mae masked credit-market losses in its latest earnings report.
Wells Fargo, the second-largest American mortgage lender, dropped after saying home-equity losses will remain “elevated” through 2008. Fannie Mae tumbled to a two-year low after Fortune said the biggest source of money for American mortgages changed the way it accounts for bad loans. JCPenney Co. declined to the lowest since 2005 after the third-biggest department-store chain reported a smaller profit and cut its earnings forecast.
The Dow Jones Industrial Average decreased 120.96, or 0.9%, to 13,110.05, weighed down by a 4.1% slide in Citigroup after the biggest American bank sold $4 billion of 10-year notes at the highest yield relative to benchmarks in its history. The S&P 500 Index lost 19.43, or 1.3%, to 1,451.15. The Nasdaq Composite Index slipped 25.81, or 1%, to 2,618.51. More than three stocks dropped for every one that rose on the New York Stock Exchange.
“We had fooled ourselves a little bit thinking that the third-quarter was going to be the proverbial ‘kitchen sink’ quarter where you got all the loan losses,” the chief investment officer at Deutsche Bank Private Wealth Management in New York, Benjamin Pace, said. “I don’t think we really had our arms around what they were.”
Treasuries climbed to the highest since 2005 as investors sought the safety of government debt.
The fallout from subprime mortgage defaults has pushed financial shares down 17% this year and limited the S&P 500’s advance to 2.3%. JCPenney’s results added to concern consumer spending is slowing ahead of the holiday shopping season. Macy’s Inc. slashed its sales forecast yesterday and a Commerce Department report showed a 0.5% decrease in October department-store sales.