Stocks Skid Again on Credit Concerns

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The New York Sun

Wall Street finished a turbulent week with another huge drop today after major banks warned of further losses on their debt portfolios, raising investor concerns that the credit market slump shows no sign of abating. The Dow Jones industrial average fell more than 220 points.

Bank of America Corp., JPMorgan Chase & Co., and Wachovia Corp. all said the ongoing credit crisis will cause another round of heavy losses during the fourth quarter. Financial institutions took big hits during the last quarter as losses from subprime mortgages hurt their balance sheets.

BofA said continued “market dislocations,” including those related to securities it owns that are backed by loans, will affect its fourth-quarter results. The bank did not provide an estimate of how large the impact will be. JPMorgan said difficult conditions may cause a fourth-quarter writedown, but did not say how much.

Wachovia, the nation’s fourth-largest bank said it faced a $1.1 billion writedown for October alone. Investors also were rattled by speculation that Barclays PLC was about to announce a $10 billion writedown, though the British bank denied the rumors.

“The extent of the situation is unknown, and that uncertainty doesn’t give investors any reasons to believe that a bottom might be in place,” a director of trading and vice president of research at Schaeffer’s Investment Research, Todd Salamone, said. “We just got more of the same this week rattling investors, and the question for investors becomes what’s the next catalyst to drive stocks higher.”

Further worries about the continuing credit market slump kept investors on edge a day after the chairman of the Federal Reserve, Ben Bernanke, said he expects the economy to “slow noticeably” this quarter.

He also said the dollar’s weakness “may have some effect on import prices” — which was confirmed today in new government data. The Commerce Department reported American import prices soared last month at their fastest pace since early last year.

Meanwhile, the University of Michigan’s preliminary November consumer sentiment index tumbled for its weakest performance since October 2005.

According to preliminary calculations, the Dow Jones industrials fell 223.55, or 1.69%, to 13,042.74. The blue chip index is down 1,155.35 points, or 8.14%, since its August high.

The Standard & Poor’s 500 index was off 21.07, or 1.43%, at 1,453.70, while the Nasdaq composite index tumbled 68.06, or 2.52%, to 2,627.94.

For the week, the Dow rose dropped 4.06% and the S&P 500 tumbled 3.71%. The technology-focused Nasdaq, which often trades with more volatility, plunged 6.49%.

Light, sweet crude for December delivery on the New York Mercantile Exchange rose 52 cents to $95.98 a barrel in afternoon trading in New York.

Bond prices rose, with the yield on the benchmark 10-year Treasury note falling to 4.22% from 4.27% late yesterday. Yields and prices move in opposite directions. The bond market will be closed Monday for the Veterans Day holiday observance; the stock market will be open. Meanwhile, both gold and the dollar were lower.

Financial stocks were among the hardest hit, though the banks that warned about the fourth quarter finished mostly flat amid relief that that might be all the current period’s trouble. BofA rose 49 cents to $43.99, JPMorgan fell 32 cents to $42.29, and Wachovia was up 31 cents at $40.61.

Investors were also uneasy about tech stocks after Qualcomm Inc., the nation’s second-biggest maker of chips that run mobile phones, predicted that heightened competition and legal troubles will cause 2008 results to fall 4% to 7% below Wall Street projections.

Qualcomm fell $1.66, or 4.2%, to $38.10.

Cisco Systems Inc. was another drag on the technology sector. It fell $1.05, or 3.5%, to $28.58 after the company warned of a dramatic decline in domestic business orders.

Merck & Co. said it will pay $4.85 billion to settle thousands of lawsuits over its painkiller Vioxx — a move considered to be the biggest drug settlement ever. The offer was finalized early today as Merck and the plaintiffs met with three of the four judges overseeing the claims. Merck rose $1.13, or 2.1%, to $55.90.

Walt Disney & Co. shares fell 89 cents, or 2.7%, to $32.74 after the entertainment company said late yesterday fiscal fourth-quarter profit rose 12%, driven by sports network ESPN and turnout at its American theme parks. However, executives remain concerned about a Hollywood writers strike that began this week.


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