Wall Street pulls back as oil prices advance
NEW YORK -- Wall Street pulled back sharply today following more reports that the financial sector remains under stress. The Dow Jones industrial average fell nearly 120 points, or about 1 percent.
Investors were concerned once again about the health of financial companies after media reports of further problems in the sector. The Wall Street Journal reported, citing unidentified sources, that Lehman Brothers Holdings Inc. might have to pre-announce its third-quarter results in anticipation of a large loss, while Barron's said the U.S. Treasury might have to recapitalize mortgage financiers Fannie Mae and Freddie Mac.
The continuing bad news about the financial sector isn't coming as a surprise, but it nonetheless is depressing a market that is hoping for concrete signs that banks and brokerages can put the year-old credit crisis behind them and return to significant profit growth.
"It's a very, very fragile balance of powers right now," said Thomas J. Lee, equities analyst at JPMorgan. "But the fact that commodities are declining is overall good for consumers and good for the market."
Lee added trading volumes in both the stock and energy markets were light, which tend to exaggerate price movements.
"There's a lot of people taking time off," Lee said. "That said, we have considerable uncertainty out there."
In midday trading, the Dow Jones industrial average fell 118.96, or 1.02 percent, to 11,540.94.
Broader stock indicators also fell. The Standard & Poor's 500 index slipped 10.91, or 0.84 percent, to 1,287.29, and the Nasdaq composite index fell 18.69, or 0.76 percent, to 2,433.84.
Last week, the Dow finished lower, but the S&P and the Nasdaq composite index ended higher, with financial sector problems again helping to bring stocks down.
Lehman shares fell 57 cents, or 3.5 percent, to $15.60, after the Journal's report.
Fannie Mae shares fell $1.31, or 16.6 percent, to $6.60, and Freddie Mac fell $1.08, or 18.5 percent, to $4.77, after the Barron's report.
UnionBanCal Corp. was one of the exceptions in the financial sector. Japanese bank Mitsubishi UFJ Financial Group Inc. raised its bid to buy the rest of UnionBanCal, the California bank that it partially owns, to $73.50 a share in a deal worth $3.5 billion. UnionBanCal shares rose $7.71, or 11.8 percent, to $73.20.
