STOCKS BURNED BY FEAR
Stocks stumbled yesterday to their biggest drop in three weeks as Wall Street grew jittery again that a meltdown in the housing market will harm the economy.
The Federal Reserve did nothing to ease investor fears. Minutes from its Aug. 7 policy meeting released during late-afternoon trading failed to signal that a much-hoped-for interest rate cut was on the way.
Wall Street has been hoping the Fed will cut interest rates to help calm the housing crisis by decreasing the cost of borrowing for both corporations and consumers.
The closely watched Dow Jones industrial average plunged 280.28, or 2.1 percent, to 13,041.85, its biggest drop since Aug. 9, when the Dow dropped more than 380 points.
The Standard & Poor’s 500 stock index, a broader measure of the market, declined 34.43, or 2.4 percent, to 1,432.36.
The technology-heavy Nasdaq tumbled 60.61, or 2.4 percent, to 2,500.64.
Fresh economic data signaling weakness in the economy and the housing market contributed to the sell-off.
Statistics released by the nonprofit think tank The Conference Board showed consumer confidence in August slipped to its lowest reading in a year, amid the recent turmoil in the financial markets.
House prices, meanwhile, fell 3.2 percent in the second quarter from the same period a year ago – their worst decline in two decades, according to a report from S&P/Case-Shiller.
“Our concern when we look out is with the U.S. consumer,” said David Chalupnik, who helps manage about $100 billion as a senior managing director at First American Funds in Minneapolis.
“Are the housing issues that we’re seeing going to finally depress the U.S. consumer? That’s the risk that we see,” he added.
Further adding to the stock market’s woes yesterday, Merrill Lynch cut its ratings on major banks, including Lehman Brothers, Bear Stearns and Citigroup, because of concerns their exposure to the debt markets might take a big bite out of their profits.
Wall Street’s fear gauge – the Chicago Board Options Exchange Volatility Index – surged for a second day and signaled traders expect big swings in the market over the next month.
With Post wires