Dow hits 4-month low
Major gauges tumble, Dow and Nasdaq end lower for fifth straight session on revived worries about credit and mortgage market.
NEW YORK (CNNMoney.com) -- Stocks tumbled Wednesday, with the Dow industrials closing at a four-month low as talk of more trouble for lender Countrywide Financial revived worries about the credit and mortgage markets.
The Dow Jones industrial average (down 170.22 to 12,858.70, Charts) fell 1.3 percent, according to early tallies, closing at its lowest point in nearly four months. The broader S&P 500 (down 19.96 to 1,406.58, Charts) index lost 1.4 percent and the tech-fueled Nasdaq Composite (down 40.29 to 2,458.83, Charts) index lost 1.6 percent.
Treasury prices rose, while the dollar was mixed versus other major currencies. Gold prices were little changed and oil prices jumped.
Here's a look at what was moving near the close.
The Dow and Nasdaq have fallen for the previous four sessions and the S&P 500 for three of the last four sessions on worries about the mortgage and credit markets. On Tuesday, declines were exacerbated by disappointing profit forecasts from retailers Home Depot and Wal-Mart Stores.
Wednesday's trading was choppier, with investors pulled between welcoming a mild inflation report and other upbeat economic news, and continuing to worry about the credit and mortgage markets.
By the late afternoon, stocks had turned negative again, as investors reacted to a steep decline in Countrywide Financial (down $3.41 to $21.05, Charts, Fortune 500), the leading U.S. mortgage lender. Countrywide had slipped modestly in the morning after Merrill Lynch downgraded it to "sell" from "buy" on worries about the mortgage market, but the stock tumbled anew in the afternoon, losing as much as 18 percent on additional worries about its future.
On Tuesday, Countrywide said that foreclosures and delinquencies rose in July to their highest level in several years.
The Dow has lost nearly 1,000 points, or 7 percent, since topping the 14,000 level almost a month ago. And the market probably has further to fall before it can move back higher, analysts argue.
"I think we're in the midst of a correction and that we have a bit more to go on the downside," said Douglas Roberts, chief investment strategist for Channel Capital Research.
"But it's not unusual for stocks to pull back a bit after a big run up," he said. "As for the longer term, I don't think this is the start of a bear market."
Earlier in the day, stocks had seesawed as investors considered a variety of factors influencing trade.
On the upside: the July consumer price index (CPI) rose modestly, as expected, in terms of both overall and core inflation; the NY Empire State index, a regional manufacturing report, was stronger than expected; industrial production and capacity utilization both increased in July, as did net foreign purchases.
On the downside: oil prices jumped to nearly $74 a barrel; Applied Materials' revenue forecast disappointed; and financial stocks remained vulnerable to the worries about the credit and mortgage markets.
In other news, an industry report showed that the price of a typical home in the United States continues to drop, but at a slower pace. A separate report showed that homebuilder confidence is at a 16-year low.
Meanwhile the Federal Reserve said it had added an additional $7 billion of temporary reserves to the banking system
Thornburg Mortgage (up $2.99 to $10.60, Charts) bounced back after sliding 47 percent on Tuesday on worries about the mortgage lender's future. The stock recovered after the company's CEO said Thornburg has no plans to file for Chapter 11 bankruptcy protection.
Shares of Accredited Home Lenders (up $0.60 to $6.10, Charts) jumped 13 percent after private equity firm Lone Star said it will extend its offer for the struggling subprime mortgage lender. On Monday, Accredited said it had sued Lone Star to force it to complete the proposed $400 million takeover.
Applied Materials (down $0.88 to $20.36, Charts, Fortune 500) slipped 3 percent after the chip gear maker said late Tuesday that current-quarter orders and revenue would fall from the last quarter. That overshadowed the company's otherwise upbeat quarterly sales and earnings report.
Blue-chip losers included Dow Components Alcoa (down $1.06 to $33.80, Charts, Fortune 500), Caterpillar (down $1.83 to $74.94, Charts, Fortune 500), General Motors (down $1.42 to $31.65, Charts, Fortune 500), Honeywell (down $1.79 to $54.58, Charts, Fortune 500) and Intel (down $0.58 to $23.22, Charts, Fortune 500).
Market breadth was negative. On the New York Stock Exchange, losers beat winners by three to one on volume of 1.56 billion shares. On the Nasdaq, decliners topped advancers by three to two on volume of 1.91 million shares.
U.S. light crude oil for September delivery rose 95 cents to $73.33 a barrel on the New York Mercantile Exchange, gaining after a weaker-than-expected weekly oil inventories report and amid worries about a tropical storm approaching the Texas coast.
Treasury prices were little changed, with the benchmark 10-year note yield at 4.73 percent.
In currency trading, the dollar rose versus the euro and fell versus the yen.
COMEX gold for December delivery fell 70 cents to $679 an ounce.