U.S. Stocks Fall With Financial Jitters Back In Play
NEW YORK (MarketWatch) -- U.S. stocks were lower on Thursday as nervousness about distress at mortgage giants Fannie Mae and Freddie Mac returned to the fore and fresh concerns emerged about investment firm Lehman Brothers.
A surge in crude-oil prices lifted the energy sector, providing some support for the major stock indexes but keeping consumer-related stocks under pressure.
"U.S. equities have rebounded from lows again though they remain anchored by crude oil holding above $121," analysts at Action Economics said.
The Dow Jones Industrial Average was down 24 points, or 0.2%, to 11,393, with 22 of its 30 components trading lower.
Jitters about the credit crisis have returned to haunt the market this week amid expectations that the government may bail out Fannie Mae and Freddie Mac .
Even as the firms' shares rebounded, the broader market kept a nervous tone.
"Talk about Freddie and Fannie nationalization has helped keep mortgage spreads wide and illiquid, which together with a renewed decline in the dollar and a parallel rebound in commodities supports a defensive tone in equities," said Lena Komileva, an economist at Tullett Prebon.
Among Dow components, oil giants Chevron and ExxonMobil both gained more than 2%, as oil surged more than 4% amid rising tensions over Russia's military conflict with Georgia.
But the Dow's financial components again led the way down, with AIG off 4.7%, Citigroup off 0.7%, Bank of America down 1.2% and J.P. Morgan Chase down 2.3%.
Shares of Lehman Brothers also came under pressure after several media reports and an analyst note. The stock was recently off 2.4%.
The Financial Times reported that the firm held secret talks earlier this month to sell as much as half of its shares to South Korean or Chinese parties but failed to reach agreement with either.
Separately, The Wall Street Journal reported the Federal Reserve had investigated a rumor that Credit Suisse pulled a credit line from Lehman. The newspaper said the Fed was told by the Swiss bank that the rumor was false.
And Citibank lowered its third-quarter earnings estimates for Lehman, along with those for Goldman Sachs and Morgan Stanley , citing asset write-downs, weaker client flows and seasonal slowdown.
The S&P 500 index dipped 1.2 points to 1,273, while the Nasdaq Composite lost 17 points to 2,371.
Trading volumes showed 498 billion shares exchanging hands on the New York Stock Exchange and 355 billion trading on the Nasdaq stock market. Declining issues topped gainers by 3 to 2 on both the NYSE and the Nasdaq.
By sector, financials fell the most, off 1.1%, followed by consumer staples and information technology, both down 1%.
Results from fiber-optic equipment maker JDS Uniphase and Salesforce.com fell short of forecasts, sending both of the firms' shares down by more than 13%.
But the energy sector helped support the market, with oil surging nearly 5%.
Oil surges
With nervousness about financials putting pressure on the dollar, the dollar index -- which measures the U.S. unit against a basket of major currencies -- fell 1%.
Dollar weakness in turn gave a boost to dollar-denominated commodities such as crude oil, which surged $5.11, or 4.4%, to $120.69 a barrel. Geopolitical tensions between the U.S. and Russia gave a further boost to oil after the U.S. agreed to construct a missile-defense system in Poland.
Other securities, which traditionally serve as measures of risk, were rising, with gold futures gaining $21.60 to $837.90 an ounce.
In economic news, the Labor Department said weekly initial jobless claims fell by 13,000 to a total of 432,000 last week. Separately, a Philadelphia-area poll of activity showed an improvement for August, while an index of U.S. leading indicators pointed to slower growth for the rest of 2008.
H.J. Heinz saidannual earnings will be at the top end of forecasts, and Tech Data's profit more than tripled.
Limited Brands rose 14% after the clothing retailer and Victoria's Secret owner said its adjusted earnings came in better than analyst expectations.
But teen retailer Hot Topic slumped more than 17% on a soft earnings outlook.
By Nick Godt