(Source: Business Week)
Major U.S. stock indexes finished sharply lower Monday as fresh reports rekindled concerns about the ailing financial and housing sectors.
Bonds rose, as did gold futures. Oil futures fell while the dollar eased.
On Monday, the Dow Jones industrial average finished lower by 180.51 points, or 1.55%, at 11,479.39. The broader S&P 500 fell 19.60 points, or 1.51%, to finish at 1,278.60. The tech-heavy Nasdaq composite index dropped 35.54 points, or 1.45%, to 2,416.98.
On the New York Stock Exchange, 22 stocks declined in price for every 9 that advanced. The ratio on the Nasdaq was 19-9 negative. Trading was slow, according to S&P MarketScope, with signs of some position unwinding after Friday's options expiry.
Financial issues declined amid worries about the fate of mortgage financiers Fannie Mae (FNM) and Freddie Mac (FRE). Shares of both government-sponsored enterprises slid after Barron's reported the U.S. Treasury is increasingly likely to recapitalize the two companies, a move that would potentially dilute the value of stock holdings. The Treasury responded by saying it has no plans to backstop either Fannie or Freddie.
Another troubled corner of the financial sector received some better news Monday. Bond insurers MBIA (MBI) and Ambac Financial (ABK) rose after S&P Ratings Services affirmed its ratings on 619 classes of U.S. asset-backed securities that benefit from bond insurance issued by the two companies, and removed them from CreditWatch with negative implications. Also, S&P Ratings affirmed its AA ratings on 13 U.S. collateralized debt obligation tranches insured by MBI and removed them from CreditWatch negative.
The August National Association of Homebuilders' [NAHB] builder sentiment index was unchanged at a record low of 16. But the measure of current single-family home sales improved to 16 from 15 in July. Projections for sales six months from now rose to 25 from 23. By region, housing market conditions improved in the Northeast and Midwest but worsened in the West. Overall, though, builders are delaying projects as sales drop, foreclosures throw more houses on the market and prices tumble.
September West Texas Intermediate crude oil futures were off 72 cents to $113.05 per barrel amid persistent concerns about petroleum demand. Prices also faltered amid signs Tropical Storm Fay, which is approaching Florida, will hit east of the heaviest concentration of Gulf of Mexico oil platforms and pipelines.
Though commodity prices have fallen in the past month, inflation worries remain.
