Stocks drop on lending worries |
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Tue, 20 Nov 2007 19:51
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NEW YORK (AP) - Wall Street pulled back Tuesday, reversing earlier gains as investors grew nervous about hefty losses at Freddie Mac, cash problems at Countrywide Financial Corp. and the Federal Reserve's upcoming release of minutes from its last meeting.The stock market had swooned Monday due to growing anxiety about upcoming losses at the world's major financial institutions. Investors initially seemed to think that sell-off was a bit overdone Tuesday morning, and drove the Dow Jones industrial average up by nearly 150 points.But worries about the subprime mortgage crisis eventually re-emerged, due largely to Freddie Mac reporting a $2 billion quarterly loss. The nation's second largest guarantor of home mortgages -- hit hard by the sinking housing market like its larger counterpart, Fannie Mae -- also said it is considering a dividend cut.Freddie shares plunged $11.17, or 30 percent, to $26.37, and Fannie shares tumbled $8.29, or 22 percent, to $29.29.Meanwhile, Countrywide Financial Corp. fell after an analyst at Fox-Pitt Kelton analyst downgraded the stock, citing a possible drying-up of liquidity, and Moody's analysts predicting losses in the next two quarters for the country's largest lender.Countrywide shares fell $1.38, or 13 percent, to $9.19.John O'Donoghue, co-head of equities at Cowen & Co., said liquidity issues at Countrywide -- which to some traders augured a possible bankruptcy -- were a main driver in the market's sell-off. 'It doesn't bode well for the economy,' he said.The Dow fell 25.76, or 0.20 percent, to 12,932.68.Broader stock indicators also retreated. The Standard & Poor's 500 index fell 2.46, or 0.17 percent, to 1,430.81, and the Nasdaq composite index fell 7.28, or 0.28 percent, to 2,586.10.Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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