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Stocks battered by mortgage messDow falls over 150 points on news Wachovia will take a $1 billion hit, forecasts for slower growth in Europe.
NEW YORK (CNNMoney.com) -- Stocks sold off early Friday, continuing steep losses for the week as Wachovia became the latest bank hit by fallout in the mortgage sector. The 30-share Dow Jones industrial average (Charts) lost 1.2 percent, while the broader S&P 500 index (Charts) fell 1.5 percent. The tech-fueled Nasdaq (Charts) slid over 2 percent. In a filing with the Securities and Exchange Commission, Wachovia (Charts, Fortune 500) said the complex debt instruments it had in its portfolio declined in value by an estimated $1.1 billion pre-tax in October. The bank had reported $1.3 billion in pre-tax losses in the third quarter tied to pools of debt backed by home loans The additional losses from Wachovia come after Citigroup (Charts, Fortune 500) said last week it expects to write down a further $8 billion to $11 billion in the fourth quarter due to credit- and mortgage-related problems. Adding to investor woes was a weak growth forecast from the European Union, which said growth in the area of 27 nations is expected to slow to 2.4 percent next year and in 2009, down from 2.9 percent this year. The EU attributed weaker growth to problems stemming from the subprime mess in the U.S. and the rise in oil prices. A bit of positive news: The U.S. trade deficit fell to the lowest level in 28 months as a falling dollar helped boost exports. Among stocks in the news early Friday, Merck (Charts, Fortune 500) announced it will pay $4.85 billion to resolve most of the the 27,000 claims involving its blockbuster pain medication Vioxx. Disney (Charts, Fortune 500) reported earnings that beat expectations on sales that were roughly in line with analysts' estimates. Clearwire (Charts) and Sprint Nextel (Charts, Fortune 500) said they ended an earlier agreement they had to build a high-speed wireless network. Oil prices eased in electronic trading. Light, sweet crude for December delivery slipped 6 cents to $95.40 a barrel. The dollar fell to another record low versus the euro. Major markets in Asia finished lower on mounting credit fears. In Europe, stocks lost ground around and were slightly lower in midday trade. |
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