New York – U.S. stocks plunged Friday, with credit concerns and a weak jobs report driving a sell-off that marked the Dow’s third-worst day of the year and steep weekly losses for the broader market.
With markets already on the decline, the pace of the sell-off quickened after a Bear Stearns conference call about the impact of bad home loans on its funds failed to reassure investors.
“They tried to put their best face on the situation, but the market wasn’t convinced,” said Mike Malone, trading analyst at Cowen & Co.
The Dow Jones industrial average ended 281.42 points lower at 13,181.91, with all of its 30 stocks closing down and the Dow taking a weekly loss of 0.7 percent.
The S&P 500 dropped 39.14 points to close at 1,433.06 and a 1.8 percent loss for the week, while the Nasdaq Composite dived 64.73 points, or 2.5 percent, to close at 2,511.25, for a weekly drop of 1.9 percent.
Dow loss leaders included American Express Co., which was down 5.53 percent, and Alcoa Inc., which fell 4.35 percent.
Volume at the New York Stock Exchange surpassed 2 billion, with declining stocks outpacing advancers 6 to 1.
At the Nasdaq, more than 2.5 billion shares were exchanged, with decliners ahead of advancing stocks 5 to 1.
“It wasn’t long ago that Fridays were good in anticipation of more (leveraged buyouts) and (mergers and acquisitions) over the weekend. Now, there has been a shift in sentiment, with fear of bad news coming out over the weekend,” Malone said.
News that DaimlerChrysler AG had closed the sale of its Chrysler unit to Cerberus Capital Management helped stem Wall Street’s losses for a brief period, with investors somewhat heartened by the closure of the deal, which involved the underwriting banks covering $10 billion in loans after the subprime-mortgage mess sapped demand for high-yield debt.
Stocks lost ground on a “disappointing” employment report and anxiety about “Bear Stearns and their credit concerns,” said John Hughes, managing director at Epiphany Equity Research.
The stock of Bear Stearns Cos. Inc. fronted a large decline in the financial and brokerage sectors, plunging 5.8 percent after S&P downgraded its outlook for Bear Stearns to negative.
Merrill Lynch & Co. Inc. fell 2.9 percent, while Dow component JP Morgan Chase Co. fell 2 percent.
Also taking a hit was the mortgage sector, with Countrywide Financial attempting to soothe liquidity concerns by announcing it has access to nearly $50 billion in short-term funding as a cushion. Its stock was off 6.2 percent.
The Labor Department reported that nonfarm payrolls grew by a lower-than-expected 92,000 in July, the lowest level since February.
