NEW YORK — Stocks tumbled Thursday as the ailing credit market and a spike in home foreclosures intensified the market’s worries about a sagging economy. The Dow Jones industrials gave up 214 points.
Concerns about credit grew after Thornburg Mortgage and a Carlyle Group bond fund revealed troubles with investments backed by mortgages. The entities failed to make margin calls, which are payments to guarantee much larger debt or investments.
And the genesis of the credit concerns that erupted last year — souring mortgage loans — dealt investors another blow after the Mortgage Bankers Association reported that home foreclosures rose to record levels in the fourth quarter. Worries about defaults have made lenders hesitant to extend credit, preventing the credit markets from functioning normally.
Wall Street’s sense that credit troubles are seeping further into areas of the financial sector once deemed safe weighed on financial stocks and the broader market.
“I think these are near-term, unfortunate events that if they had the luxury of time and capital they could probably weather, but unfortunately with this leverage-based system we have, time is a very expensive luxury,” Jack Ablin, chief investment officer at Harris Private Bank in Chicago, said in reference to the difficulties at Thornburg and Carlyle.
The Dow fell 214.60, or 1.75 percent, to 12,040.39 — almost slipping below the 12,000 level, which it briefly did in January for the first time since November 2006.
Broader indexes also retreated. The Standard & Poor’s 500 index fell 29.36, or 2.20 percent, to 1,304.34, and the Nasdaq composite declined 52.31, or 2.30 percent, to 2,220.50.
“It’s an ugly day in a chain of ugly days,” said JPMorgan equities analyst Thomas J. Lee.
The Dow managed a moderate gain after a volatile session Wednesday and had fallen in the four previous sessions.
The stock market’s performance going forward will rely largely on today’s employment report. Economists on average are predicting a modest gain in February payrolls, but some anticipate a decline. According to Lee, a bad jobs number could send the stock market lower by confirming investors’ fears of a recession, while a good jobs number will probably be met with some skepticism.
Wall Street is worried that Americans distressed about their home values or struggling with mortgage payments will pare their spending. Investors appeared to take an upbeat report from Wal-Mart as a mixed signal. While Wal-Mart reported stronger-than-expected sales for February, some investors are worried that success at the world’s largest retailer reflects increased bargain-hunting by consumers.
Reports from retailers such as J.C. Penney Co. and Limited Brands Inc., the parent of the Victoria’s Secret and Bath & Body Works chains, indicated consumers are paring some spending that they don’t regard as essential.
