Stocks Tumble On Wall Street

Tuesday, March 13th 2007, 1:16 pm
By: News On 6

NEW YORK (AP) _ Stocks plunged Tuesday, driving the Dow Jones industrials down more than 200 points and erasing the gains from the past three sessions as troubles for subprime lenders kept piling up.

Investors, bracing for a wilting economy, fled the already deflated subprime mortgage sector as problems increased for lenders such as New Century Financial Corp., Accredited Home Lenders Holding Co. and General Motors Acceptance Corp.'s residential unit. Bolstering the belief that the problems are widespread, the Mortgage Bankers Association reported that mortgage delinquencies and foreclosures climbed in the last quarter of 2006.

The subprime lending worries, coupled with anxiety over the Commerce Department's report Tuesday that U.S. retailers eked out a meager 0.1 percent rise in sales last month, knocked down all three major stock indexes more than 1 percent.

``The market's still jittery, and they're starting to get full-blown concerns over a bleed in the larger subprime mortgage market,'' said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds.

The subprime market is a relatively small sector of the U.S. economy, Kelmon noted. But Tuesday's selling was accentuated by options expiring soon and volatility that has increased since the market's big plunge two weeks ago _ a 416-point drop in the Dow that was caused partially by the problems of subprime lenders, who loan to people with poor credit.

In midafternoon trading, the Dow fell 216.30, or 1.8 percent, to 12,102.32. Broader stock indicators also fell. The Standard & Poor's 500 index fell 21.79, or 1.55 percent, to 1,384.81, and the Nasdaq composite index slid 39.05, or 1.63 percent, to 2,363.24.

Subprime lending jitters and sluggish retail sales drove up bond prices. The yield on the benchmark 10-year Treasury note fell to 4.50 percent from 4.56 percent late Monday. Gold prices fell.

The dollar was lower against other major currencies, notably the yen. That movement renewed anxiety about traders unwinding their yen ``carry trades,'' or taking money out of high-yielding dollar assets bought with the low-yielding yen.

There was little good news to keep stocks afloat Tuesday. The Commerce Department said sales at U.S. retailers rose 0.1 percent in February as wintry weather in much of the country kept shoppers away from stores. Investors had expected an increase of 0.3 percent from January.

``I think a big question mark on this is how much of this is weather-related,'' said Rob Lutts, chief investment officer at Cabot Money Management. ``We had two or three days during the month which knocked out activity. ... I think it is causing a little bit of alarm short-term.''

Several retailers fell following the Commerce Department's report. Federated Department Stores Inc., parent of Macy's and Bloomingdale's, fell 92 cents, or 2 percent, to $44.02; Wal-Mart Stores Inc. slid $1.05, or 2.2 percent, to $46.21; and Target Corp. fell $1.85, or 3 percent, to $60.38.

Meanwhile, the New York Stock Exchange took steps to delist New Century shares, and the company said the Securities and Exchange Commission was conducting a preliminary inquiry into accounting errors that inflated its loan portfolio.

Accredited Home shares plunged $7.09, or 62 percent, to $4.31, after it disclosed its own liquidity problems.

And the Mortgage Bankers Association's quarterly report on the mortgage market confirmed investors' worries that the entire sector is struggling and could weaken further: late mortgage payments soared to a 3 1/2-year high in the fourth quarter of last year, and new foreclosures hit a record high.

Giving stocks an extra kick lower was a report from General Motors Acceptance Corp., General Motors Corp.'s part-owned financing arm, which reported that its fourth-quarter profit rose but that struggles in its Residential Capital LLC unit was eating into earnings.

``Investors are poking around to see how much rotted wood there is here,'' said Jack Ablin, chief investment officer for Harris Private Bank. ``It looks like the notion was subprime was contained, and now we're starting to see that maybe this problem has moved into other areas of the market. That's causing investors great concern.''

Investors trying to determine the breadth of the problems in the subprime sector also pounced on comments from Goldman Sachs. The investment bank said that while the subprime sector showed ``significant weakness,'' the broader credit environment ``remained strong.'' Still, Goldman Sachs fell $1.83 to $200.77, despite record first-quarter profit thanks to strong revenue from trading and investment banking.

Declining issues outnumbered advancers by 4 to 1 on the New York Stock Exchange, where volume came to 1.34 billion shares.

The Russell 2000 index of smaller companies fell 16.66, or 2.11 percent, to 772.34.

Overseas, Japan's Nikkei stock average fell 0.66 percent. Britain's FTSE 100 fell 1.16 percent, Germany's DAX index fell 1.36 percent, and France's CAC-40 fell 1.15 percent.

Light, sweet crude fell 85 cents to $58.06 per barrel on the New York Mercantile Exchange.