Stocks: Down another day

Nasdaq composite leads broader decline as investors focus on global market sell-off, subprime lending market woes.

By Alexandra Twin, senior writer

NEW YORK ( -- Stocks tumbled Monday, with the Nasdaq hit the hardest, as investors continued to bail out of equities amid weakness in global markets and worries about the fallout from the subprime mortgage lending business.

The tech-fueled Nasdaq (down 27.32 to 2,340.68, Charts) composite fell 1.2 percent.

Is the stock selloff just a blip or the start of a longer downturn?
  • Blip
  • Longer slump
  • Too early to say

The broader S&P 500 (down 13.05 to 1,374.12, Charts) index fell just short of 1 percent, and the Dow Jones industrial average (down 63.69 to 12,050.41, Charts) lost 0.5 percent.

The Russell 2000 (down 15.38 to 760.06, Charts) small-cap index lost nearly 2 percent.

Stocks slumped in the morning, staging a recovery in the early afternoon before eventually tumbling anew by the close.

The day's weakness was sparked by a sell-off in international markets, weakness in commodities and commodity stocks and ongoing worries about how the subprime mortgage lending losses will affect the broader economy.

Treasury prices slipped modestly, boosting the corresponding yields. The dollar fell versus the yen and rose versus the euro. Oil and gold prices tumbled.

Stocks slumped Friday at the end of the worst week on Wall Street since early 2003, as worries about growth at home and abroad caused investors to stage a mass exodus.

That selling continued to affect trading Monday, with a morning rally attempt losing momentum amid investor jitters.

"There's a lot of nervous people out there and you're seeing them sell now and ask questions later," said Joseph Saluzzi, co-head of equity trading at Themis Trading. "We're probably in the sell-the-rally-mode until something big comes out to change the sentiment."

He said that maybe some signs of stronger growth in the week's economic news could help temper the jitters. Reports are due on productivity and factory orders on Tuesday. The Fed's "beige book" survey of economic activity is due Wednesday.

Stocks in Japan - and elsewhere in Asia - slumped as investors continued to pour money into the yen. European markets closed lower as well.

The yen has been surging over the past week as investors continue to close out carry trades, or bets on riskier currencies or assets, bought by borrowing in the currencies of countries with low interest rates, such as Japan.

In currency trading, the dollar fell to a three-month low versus the yen. The dollar rose, however, versus the euro after the European currency also slumped versus the yen.

Also in focus: revived worries about subprime mortgage lending woes.

HSBC (down $0.36 to $85.91, Charts) reported a record gain in 2006, but it also said it took $10.6 billion in losses on bad debts owing to problems in its U.S. mortgage lending.

New Century Financial (down $10.09 to $4.56, Charts) shares slumped nearly 69 percent on news that prosecutors have started a criminal probe into its securities trading. Following the news, several analysts speculated that the company could face bankruptcy or possible liquidation.

Fremont General (down $2.82 to $5.89, Charts) said that it plans to sell its subprime residential mortgage lending business, sending shares down by 32 percent.

Other subprime mortgage lenders tumbled, too, including Accredited Home Lenders (down $5.64 to $16.06, Charts) and Novastar Financial (down $2.96 to $4.28, Charts).

In other news, Advanced Micro Devices (down $0.23 to $13.95, Charts) slipped after the chip maker said that first-quarter revenue won't meet forecasts.

Wireless device maker Palm (down $1.80 to $16.50, Charts) is considering putting itself up for sale, according to an article in The Wall Street Journal over the weekend. Shares tumbled close to 10 percent in active Nasdaq trading.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by more than 5 to 1 on volume of 1.99 billion shares. On the Nasdaq, decliners topped advancers by 4 to 1 on volume of 2.36 billion shares.

Investors took in afternoon comments from Federal Reserve Governor Kevin M. Warsh, who said that stock markets are working well despite the recent declines and that liquidity does not seem to be in short supply.

Earlier in the day, St. Louis Federal Reserve Bank President William Poole, speaking in Santiago, Chile, said that low inflation has provided a cushion for the U.S. economy amid the impact of the slowing housing market.

Both Warsh and Poole are voting members of the Fed's policy committee.

The February Institute for Supply Management index on the services sector of the economy was released in the morning. The index fell to 54.3 from 59.0 in January. Economists surveyed by thought it would fall to 57.5

Treasury prices were little changed, with the yield on the 10-year note at 4.50 percent, little changed from late Friday. Treasury prices and yields move in opposite directions.

U.S. light crude oil for April delivery fell $1.57 to $60.07 a barrel after the slide in global markets spread to commodities.

COMEX gold for April delivery fell $4.90 to settle at $639.20 an ounce.

Brutal day on Wall Street

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