Market starts week down 57 points
NEW YORK — Wall Street tumbled Monday, led by financial services stocks, on concerns that the U.S. economy’s expansion will erode amid troubles in the mortgage industry.
The stock market’s decline follows a week in which the Dow Jones industrial average made its biggest weekly point gain in more than four years, rising nearly 391 points, or 3.01 percent. But that advance proved short-lived after a pair of Federal Reserve officials on Monday expressed worry about the subprime mortgage crisis and its impact on banks and brokerages.
Fed Bank of Boston President Eric Rosengren said in a speech that he was concerned that home foreclosures might worsen as overall economic growth slows. Meanwhile, San Francisco Fed President Janet Yellen labeled growth in the final three months of the year as being “only very meager” and warned that housing problems could “spill over” into consumer spending.
Investors have been looking for a government-sponsored rescue of the mortgage industry. Treasury Secretary Henry Paulson said in a speech that the White House is moving closer to an agreement to help thousands of homeowners avoid mortgage defaults by temporarily holding their interest rates steady.
Lincoln Anderson, chief investment officer and chief economist at LPL Financial Services in Boston, said investors are uncertain about where stocks will head after last week’s gains and are awaiting economic readings such as the employment report due Friday.
“I think what we’ve got is a market that’s trying to sort out whether we’re seeing a big shift in the economic and investment fundamentals here or whether we’re just going to continue to slog along,” he said.
The Dow Jones industrial average fell 57.15, or 0.43 percent, to 13,314.57.
Broader stock indicators were also lower. The Standard & Poor’s 500 index dropped 8.72, or 0.59 percent, to 1,472.42, and the Nasdaq composite index fell 28.83, or 0.90 percent, to 2,637.13.
Investors also considered a report from the Institute for Supply Management that showed the pace of growth in the manufacturing sector slowed in November, though not as quickly as had been expected. The report was better than analysts’ expectations.
Bond prices rose on Monday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.87 percent from 3.94 percent late Friday.
Overseas, Japan’s Nikkei stock average rose 0.33 percent, while Hong Kong’s Hang Seng index rose 0.05 percent. In afternoon trading, Britain’s FTSE 100 fell 0.71 percent, Germany’s DAX index fell 0.42 percent, and France’s CAC-40 fell 0.72 percent.