New York – Stocks plunged Tuesday, driving the Dow Jones industrials down more than 240 points to their second-biggest drop in almost four years, as troubles piled up for subprime lenders.
Investors, bracing for a wilting economy, fled the already- deflated subprime mortgage sector on more news that lenders New Century Financial Corp., Accredited Home Lenders Holding Co. and General Motors Acceptance Corp.’s residential unit are facing financial problems. The Mortgage Bankers Association bolstered the belief that the struggles are widespread after it said new foreclosures surged to an all-time high in the last quarter of 2006.
All three major stock indexes were down about 2 percent.
“The market’s still jittery, and they’re starting to get full-blown concerns over a bleed in the larger subprime mortgage market,” said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds.
That, coupled with the Commerce Department’s report Tuesday that U.S. retailers eked out a meager 0.1 percent rise in sales last month, led Wall Street to reconsider whether Americans’ buying power will withstand an economic slowdown.
The Dow fell 242.66, or 1.97 percent, to 12,075.96. On March 24, 2003, the index dropped 307 points when U.S. casualties began mounting in Iraq.
The blue-chip index is now down about 710 points, more than 5 percent, from its record close reached Feb. 20. Many market watchers suspect that the market’s correction is not over.
Broader stock indicators also fell by their largest amounts in two weeks. The Standard & Poor’s 500 index fell 28.65, or 2.04 percent, to 1,377.95, and the Nasdaq composite index slid 51.72, or 2.15 percent, to 2,350.57.
Consolidated volume on the New York Stock Exchange, where declining issues outnumbered advancers 5 to 1, was high at 3.49 billion shares – more than the 2.62 billion traded a day earlier but lower than the 4.56 billion shares traded Feb. 27, when the Dow took its largest plunge since Sept. 17, 2001.
Japan’s markets reacted with declines at midday. The Nikkei 225 Stock Average slid 512.04, or 3 percent, to 16,666.80 in the morning session while the broader Topix index declined 49 points, or 2.9 percent, to 1675.88.
Gold prices fell, and the dollar was lower against most major currencies. A drop in the dollar versus the yen renewed anxiety about traders unwinding their yen “carry trades,” or taking money out of high-yielding dollar assets bought with the low-yielding yen.
