Stocks continue their August slump

NEW YORK (CNNMoney.com) -- Stocks slumped early Thursday, extending the recent selloff, as more problems for lender Countrywide Financial kept worries about the credit and mortgage markets in focus.

The Dow Jones industrial average (down 53.98 to 12,807.49, Charts) fell 120 points, or 0.9 percent, in the early going, after ending the previous session at its lowest point in almost four months. The broader S&P 500 (down 6.92 to 1,399.78, Charts) index lost 0.9 percent and the tech-fueled Nasdaq Composite (down 7.97 to 2,450.86, Charts) index lost 0.7 percent.

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The Dow and Nasdaq have fallen for five sessions in a row, and the S&P 500 has slipped for four of the last five sessions, as investors have retreated from stocks on worries about tightening credit and the fallout from the subprime mortgage market.

Those worries were sustained Thursday after Countrywide Financial (down $2.89 to $18.40, Charts, Fortune 500), the largest U.S. mortgage lender, said it was forced to tap an $11.5 billion line of credit to offset its liquidity crunch.

Countrywide's increasing troubles over the last few days have exacerbated fears about a global credit crisis.

On Thursday, the Federal Reserve added an additional $17 billion in temporary reserves to the banking system.

Separately, St. Louis Fed president William Poole said late Wednesday that it would not be desirable for the Fed to act before the next meeting. Poole, a voting member of the Fed's policy-setting committee, said that the turmoil in the markets has not spread to the economy.

Since peaking in mid-July, the Dow has lost over 8 percent and the S&P 500 has lost more than 9 percent, as of Wednesday's close. The Nasdaq is more than 9.5 percent off its 2007 high from mid July.

Also hurting Thursday's trading, reports showing that July housing starts and building permits have fallen to a decade low.

U.S. light crude oil for September delivery fell $1.63 to $71.70 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery fell $5.30 to $674.40 an ounce.

Treasury prices rose, lowering the benchmark 10-year note yield to 4.65 percent from 4.71 percent late Wednesday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar was flat versus the euro and fell versus the yen.