Stocks slump, oil soars
Pastor Dale Morgan
Stocks slump, oil soars*
Dow finishes more than 360 points lower after Citigroup downgrade as Fed
bounce is wiped out.
By David Ellis, CNNMoney.com staff writer
November 1 2007: 4:13 PM EDT
NEW YORK (CNNMoney.com) -- The Dow industrials suffered one of its
biggest declines of the year Thursday, plummeting more than 360 points
after a Citigroup downgrade served as a blunt reminder to Wall Street
that the credit market crisis is not over.
The Dow Jones industrial average (Charts) finished 362 points, or about
2.6 percent, lower based on early tallies.
The broader S&P 500 index (Charts) lost 2.6 percent, while the
tech-fueled Nasdaq slipped nearly 2.3 percent.
Trading curbs remained active on the New York Stock Exchange after going
into effect early in the session to limit the market's downside.
Oil prices reached a new record high of $96.24 a barrel in electronic
trading earlier Thursday. But light, sweet crude for December settled 42
cents lower to $93.07 a barrel in afternoon trade on the New York
Mercantile Exchange.
Treasury prices gained, lowering the yield on the benchmark 10-year note
to 4.34 percent from 4.47 percent a session earlier. Prices and yields
move in opposite directions.
Here's what was moving before the close:
Leading the 30-stock Dow index lower was Citigroup (Charts, Fortune
500), whose stock fell 6.9 percent in afternoon trade to its lowest
level in 4-1/2 years.
Citi shares tumbled after a CIBC World Markets analyst downgraded the
company's stock and added that Citigroup may have to cut its dividend in
order to raise $30 billion in capital.
News of the downgrade hit Citi stock and sparked fears that other major
financial players were harder hit by this summer's subprime crisis than
originally anticipated. Some investors worry that because the value of
many of these mortgage-backed securities has not been determined, firms
like Citi may have to take additional losses.
Shake-ups on the Street
"It's continued concern about subprime and the pricing of these
securities," said Owen Fitzpatrick, head of the U.S. equity group at
Deutsche Bank.
"Even though they took writedowns, I think there's a lot still sitting
on their books and a general concern that they may have to see further
reductions."
Adding to the negative sentiment was Credit Suisse (Charts), which
reported a 31 percent drop in profits Thursday - hurt by the U.S.
housing market and weakened demand for buyout loans.
Also pressuring stock were disappointing results from oil major Exxon
Mobil (Charts, Fortune 500), which reported a bigger-than-expected drop
in quarterly earnings, driving down its shares by 4 percent.
Among individual issues, 29 out of 30 Dow components finished lower.
Stocks surged just a day earlier 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.
But 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.
And initial jobs claims came in at 327,000, a bit less than forecasts
and the previous week's reading.
But the biggest economic reading for the week still lies ahead for
investors. Due out before the opening bell Friday is the monthly
employment report for October.
Both economists and Wall Street will be closely watching for signs
whether this summer's mortgage crisis has spilled over to the broader
economy.
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 36 percent after it
forecast late Wednesday that its 2007 sales would miss Wall Street
expectations.
Ford Motor (Charts, Fortune 500) was the first to report October sales
Thursday, reporting a 9.5 percent decline. Sales at crosstown rival
General Motors (Charts, Fortune 500) improved during the month,
outpacing gains at Japanese rival Toyota Motor (Charts).
Market breadth was negative. Losers beat winners by nearly 7 to 1 on the
New York Stock Exchange on volume of 1.57 billion shares. Decliners
topped advancers by 5 to 1 on the Nasdaq as 2.45 billion shares traded
hands.
The dollar, which hit yet another record low against the euro Wednesday
after the Fed rate cut, recovered slightly on the European currency but
was lower versus the yen.
Gold prices, which Wednesday topped $800 for second straight session
before retreating $1.60 to $793.70 an ounce. Top of page