NEW YORK — Wall Street pulled back in erratic trading Monday as investors grew more concerned about a deteriorating housing market and the widening impact of soured debt after Citigroup Inc. warned it plans to book $8 billion to $11 billion in additional losses.
Citi’s expected losses came on top of the $6.5 billion in asset markdowns and other credit-related losses the company recorded in the third quarter.
The re-emergence of credit concerns – like those that pummeled Wall Street over the summer – comes as the market also contends with concerns about housing and the health of consumer spending, and with rising expectations that the Federal Reserve is leaning away from cutting interest rates when it meets next month.
Meanwhile, a central banker’s warning Monday that the subprime-mortgage market will likely deteriorate further added to the pressure on stock prices. Fed Gov. Randall Kroszner told the Consumer Bankers Association Fair Lending Conference in Washington that “conditions for subprime borrowers have the potential to get worse before they get better.”
The problems may be spreading. A Federal Reserve survey of banks showed that lenders are making it harder to get a home loan, even for borrowers with good credit. About 40 percent of respondents said they had tightened lending standards on prime mortgages during October, up from 15 percent in July.
The Dow Jones industrial average fell 51.70, or 0.38 percent, at 13,543.40. The Dow was down nearly 150 points early in the session and briefly popped into the plus side in the late afternoon.
Broader stock indicators also fell. The Standard & Poor’s 500 index fell 7.48, or 0.50 percent, to 1,502.17, and the Nasdaq composite index fell 15.20, or 0.54 percent, to 2,795.18.
The Russell 2000 index of smaller companies fell 7.35, or 0.92 percent, to 790.43.
The unease over Citi’s debt follows the widely expected decision by Charles Prince to resign as the company’s chairman and chief executive at an emergency meeting of its board Sunday. Citi fell $1.83, or 4.9 percent, to $35.90 and was the steepest decliner among the 30 stocks that make up the Dow industrials.
Prince’s resignation came less than a week after Stan O’Neal stepped down as CEO at Merrill Lynch & Co. Citi and Merrill have struggled with securities they hold that are tied to subprime loans, those made to borrowers with poor credit.
Merrill fell $1.40, or 2.4 percent, to $55.88 after falling nearly 8 percent Friday.
“Financials are struggling with this really unknowable and unending plague of asset quality,” said John Merrill, chief investment officer at Tanglewood Capital Management in Houston.
