Wall Street retreats as financials weaken
NEW YORK -- Stocks turned lower Tuesday after fresh worries about the stability of Lehman Bros. Holdings Inc. touched off renewed jitters about the overall financial sector.
Another drop in oil prices weighed on the energy sector.
Wall Street's pullback comes a day after the biggest rally in a month in the Dow Jones industrial average so some retrenchment might have been expected. But the latest unease punctured a sense of optimism about the financial sector that followed the government's decision to seize control of mortgage lenders Fannie Mae and Freddie Mac.
Lehman fell $4.65, or 33 %, to $9.50 as investors worried that the No. 4 U.S. investment bank is having trouble finding fresh sources of capital. Investors grew worried that a possible investment from South Korea's government owned Korea Development Bank remained in doubt. The two sides are said to have called off talks, according to media reports.
Many financial companies, including Lehman, have struggled with souring mortgage debt on their books and have looked to outside sources of funding to shore up their balance sheets.
In midday trading, the Dow Jones industrial average fell 93.55, or 0.81 %, to 11,417.19.
Broader indexes were also fell. The Standard & Poor's 500 index declined 17.72, or 1.40 %, to 1,250.07 and the Nasdaq composite index fell 17.45, or 0.77 %, to 2,252.31.
The declines ate into returns logged Monday when the Dow jumped 2.6 %, the S&P 500 rose 2.1 % and the technology-heavy Nasdaq composite index added 0.62 %.
Bond prices rose as stocks retreated. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.62 % from 3.68 % late Monday.
Light, sweet crude fell $2.08 to $104.26 on the New York Mercantile Exchange as Hurricane Ike appeared to be headed away from energy installations in the Gulf Coast. In addition, comments from Saudi Arabia suggested that OPEC could decide to keep crude output steady despite worries about falling prices.
The dollar was mixed against other major currencies, while gold prices fell.
A weaker-than-expected report on pending U.S. home sales likely added to Wall Street's downbeat mood. The National Association of Realtors said its seasonally adjusted index of pending sales for existing homes fell 3.2 % to a reading of 86.5 from an upwardly revised June reading of 89.4. The index was 6.8 % below year-ago levels, and missed projections for a reading of 88.6.
