Stocks fall amid more housing concerns
NEW YORK – Wall Street sank for a second straight session Tuesday after Federal Reserve Chairman Ben Bernanke said the slumping housing market remains a “significant drag” on the economy.
Bernanke’s speech Monday night in New York elevated concerns that the summer’s credit tightness might persist into the winter – a sobering thought for investors, who are sifting through mixed third-quarter earnings and watching energy costs rise.
“First of all, the worry is we’re getting more bad news on housing. No. 2 is higher oil prices. That’s a pretty bad combination,” said Hugh Johnson, chief investment officer of Johnson Illington Advisors.
Crude oil prices spiked to another record above $88, and a National Association of Home Builders’ index that tracks developers’ expectations of future home sales fell for the eighth consecutive month to the lowest point since January 1985.
Also Tuesday, Treasury Secretary Henry Paulson echoed Bernanke’s concerns, saying housing is a significant risk to the economy.
The uncertainty on Wall Street about the economic outlook “comes at a time when earnings results are not particularly exciting – in fact, are dismal,” Johnson said.
A day after Citigroup Inc. reported a steep third-quarter profit decline and announced plans with other banks to set up a fund to bail out the credit markets, some more banks released disappointing results.
Wells Fargo & Co. shares fell nearly 4 percent after the bank said third-quarter earnings increased by less than analysts anticipated and that it boosted loan-loss reserves in preparation for more problems in consumer credit. KeyCorp shares declined nearly 6 percent after the Midwest regional bank posted a 33 percent drop in third-quarter profit.
The Dow Jones industrial average fell 71.86, or 0.51 percent, to 13,912.94, after falling more than 100 points earlier Tuesday.
Broader indicators also declined. The Standard & Poor’s 500 index slid 10.18, or 0.66 percent, to 1,538.53, and the Nasdaq composite index dipped 16.14, or 0.58 percent, to 2,763.91.
The technology-dominated Nasdaq could get a boost, though, today: Intel Corp. and Yahoo Inc. posted better-than-expected third-quarter results after the bell Tuesday, and their stocks gained sharply in after-market trading.
Bond prices rose as investors pulled money out of stocks. The yield on the 10-year Treasury note, which moves inversely to the price, fell to 4.66 percent from 4.68 percent at Monday’s close.
The dollar rose against most currencies. Gold also rose.
On Monday, the Dow and the S&P posted their biggest point drops in five weeks; just last week, the two indexes touched record highs.