Stocks stumbled out of the gate today, led lower by the financial sector, with the Dow Jones industrial average plunging more than 180 points and threatening to close below 13,000 for the first time since the nadir of August’s subprime crisis.
The retreat started after Citigroup was downgraded to “sell” by a Goldman Sachs analyst, who warned that the company could face an additional $15 billion in write-downs from assets tied to complex debt instruments. The news sent Citi’s stock down 5.1 percent in early trading, to $32.26 a share, near a four-year low.
The analyst’s report sent ripples through the market, reigniting fears of a credit squeeze as financial giants struggle to dig out from poor bets on securities tied to subprime home loans. Shares of all the top brokerage firms were down, keeping pace with a 17.6 percent plunge for financial companies for the year.
The bad news did not end there. Swiss Re, the world’s largest reinsurer, announced nearly $1 billion in losses on derivatives it had sold to protect clients against a downturn in investments linked to mortgages.
Staggering financials dragged down the Standard & Poor’s 500-stock index, which dipped 1.5 percent to 1,436.19. The Dow was down 1.4 percent, or 185.26 points, to 12,991.53 shortly after 1 p.m.
And just in case they had forgotten, investors were reminded yet again that the housing market remains deeply troubled. Shares of Lowe’s, the home-improvement retailer that competes with Home Depot, dropped 6.6 percent to a three-year low after it announced a 10 percent drop in third-quarter profit and lowered its annual earnings forecast.
In a news release, the company’s chief executive, Robert A. Niblock, cited “an even steeper decline in housing turnover, falling home prices in many markets, and a near record inventory of homes for sale.”
The bleak news comes a day before the government is set to release data on new housing projects in October. Analysts expect the survey to hit its lowest level in over a decade.
The Nasdaq composite index fell 1.5 percent, to 2,597.09, a signal that technology stocks remain down after being battered in recent weeks.
source: nytimes.com
