New York – Wall Street resumed its downward skid Tuesday, falling sharply as renewed concerns about soured home loans blew away what had looked like a solid recovery rally. The Dow Jones industrials lost nearly 150 points, while investors seeking safety moved into bonds.
Early in the session, stocks soared following strong earnings from General Motors Corp. and Sun Microsystems Inc. amid somewhat mixed economic data.
The market pulled back after American Home Mortgage Investment Corp. said Tuesday afternoon it hasn’t been able to tap into its credit lines and has hired advisers to consider its options, including the sale of its assets.
Wall Street has been concerned about credit after some loans made to borrowers with poor credit have gone bad, and that anxiety contributed to the market’s big plunge last week. Tuesday’s trading showed how vulnerable the market remains and how any advance can quickly evaporate.
“Anything that argues for higher (interest) rates and worsening credit conditions will be something that takes the air out of the market,” said Denis Amato, chief investment officer at Ancora Advisors.
He said the market’s short- lived advance was in part made possible by a temporary easing of credit fears.
The Dow fell 146.32, 1.10 percent, to 13,211.99 after being up 140 points during the session. The move lower undid a nearly 93-point gain the blue chips saw Monday in a partial rebound from the 585 points they lost Thursday and Friday.
Broader stock indicators fell. The Standard & Poor’s 500 index dropped 18.64, 1.26 percent, to 1,455.27, and the Nasdaq composite index declined 37.01, 1.43 percent, to 2,546.27.
Bond prices rose as investors quickly fled stocks. The 10-year Treasury note’s yield fell to 4.74 percent from 4.81 percent late Monday.
Oil prices closed above $78 a barrel for the first time Tuesday on the New York Mercantile Exchange, advancing $1.38 to $78.21.
Tuesday’s initial stock gains came after a mixed batch of economic reports.
The Commerce Department’s year-over-year core personal-consumption expenditures – a closely watched inflation measure – rose 1.9 percent in June, within the Federal Reserve’s comfort zone.
The report said personal spending last month inched up 0.1 percent, its slowest pace in nine months.
