Dow tumbles on Citi, Exxon news

Index falls by as much as 258 points Citigroup downgrade, Exxon Mobil results before paring some losses.

By David Ellis, staff writer

NEW YORK ( -- Stocks extended their early losses Thursday with the Dow falling more than 250 points, as a downgrade of Citigroup and disappointing earning from Exxon Mobil troubled investors.

The Dow Jones industrial average (Charts) fell by as much as 258 points, but was trading 223 points, or 1.6 percent lower, an hour into the session.


The broader S&P 500 index (Charts) lost nearly 1.7 percent, while the tech-fueled Nasdaq slipped 1.3 percent.

Trading curbs, which prevent a massive selloff in the market, remained active on the New York Stock Exchange after going into effect just after the market open.

Stocks got off to a lower start after Exxon Mobil (Charts, Fortune 500) reported a bigger-than-expected drop in its quarterly earnings, driving down its shares by 2.6 percent.

Helping to lead the 30-stock Dow index lower was an analyst downgrade of Citigroup (Charts, Fortune 500) that said the company may have to cut its dividend in order to raise capital. Citigroup shares fell 6.6 percent in morning trade.

Also pressuring stocks were sky-high oil prices that hit a new record of $96.24 a barrel in electronic trading, before turning lower, falling $2.34 to $92.19 a barrel on the New York Mercantile Exchange.

On Wednesday, stocks jumped after the Federal Reserve delivered the quarter percentage point rate cut that Wall Street was hoping for and lowered its key lending rate to 4.5 percent.

With the Fed decision behind them, investors shifted their attention to a host of economic reports delivered Thursday.

The government reported that personal income and spending by individuals rose less than expected in September, while personal income rose in line with expectations.

The report also included a key inflation measure known as the core PCE deflator, which measures prices paid by consumers for items other than food and energy. It showed a 1.8 percent increase, within the Fed's comfort level.

Manufacturing in the United States grew less than expected during the month of October, the Institute for Supply Management reported, suggesting that woes in the housing market could be spreading to the broader economy.

Initial jobs claims came in at 327,000, a bit less than forecasts and the previous week's reading.

In other corporate news, Sprint Nextel (Charts, Fortune 500) reported a steep drop in profits Thursday, hurt by its wireless business.

Shares of footwear maker Crocs (Charts) tumbled 30 percent after it forecast late Wednesday that its 2007 sales would miss Wall Street expectations.

Altria (Charts, Fortune 500), the nation's No. 1 cigarette maker, said Thursday it agreed to buy cigar maker John Middleton for$2.9 billion in cash. Shares of Dow component Altria slipped 0.3 percent in pre-market trading on the news.

U.S. automakers are due to report October sales Thursday. Analysts are looking to see if General Motors (Charts, Fortune 500) can again post improved sales compared a year earlier, as it did in September when it gained ground on both domestic rivals such as Ford Motor (Charts, Fortune 500) and Chrysler, as well as some Asian competitors such as Toyota Motor Corp. (Charts)

Treasury prices gained, lowering the yield on the benchmark 10-year note to 4.38 percent from 4.47 percent a session earlier.

The dollar, which hit yet another record low against the euro Wednesday after the Fed rate cut, recovered slightly on both the European currency and the yen.

Gold prices, which Wednesday topped $800 for second straight session before retreating $7.20 to $788.10.

In global trade, Asian stocks finished higher while European stocks moved sharply lower in afternoon trade.  Top of page