Wall Street dips on mortgage worries
BANKS led US stocks lower yesterday as investors fretted a widening foreclosure crisis could undermine the market’s strength over the last five weeks.
The S&P 500 has rallied 11.9 per cent since 1 September and volume has picked up from anaemic levels. But the rally could weaken as an index of bank stocks fell nearly three per cent yesterday over growing fears the foreclosure problems could bleed into the broader credit markets and the economy.
The technology sector continued to show strength, with Google up more than nine per cent in extended trading after beating Wall Street’s expectations.
Chipmaker Advanced Micro Devices jumped more than seven per cent after hours on the back of another profit beat.
During the regular session, JPMorgan Chase lost 2.8 per cent to $38.72 and Bank of America fell 5.2 per cent to $12.60, while the KBW bank index dropped 2.6 per cent.
All 50 US states are investigating the mortgage industry, and investors are growing concerned it will hurt bank earnings.
Fears about lenders strength could be seen earlier in the week in credit derivatives, as the cost of insuring bank debt against default has jumped.
Apollo Group led declines in the Nasdaq 100, as shares plunged 23.2 per cent to $38. Stocks of for-profit education companies fell to six-week lows after the sector bellwether withdrew its 2011 outlook and forecast sharp drops in new student enrolments.
The Dow Jones industrial average dipped 1.51 points, or 0.01 per cent, to 11,094.57.
The Standard & Poor’s 500 dropped 4.29 points, or 0.36 per cent, to 1,173.81.
The Nasdaq Composite shed 5.85 points, or 0.24 per cent, to 2,435.38.
About 9.04bn shares traded on the New York Stock Exchange, the American Stock Exchange and the Nasdaq, above this year’s daily average of 8.78bn.
The US dollar’s slide helped limit stocks’ losses, as a weaker greenback puts a bid under commodities and other assets traded using the US currency.