NEW YORK — Wall Street fell sharply for a second straight day Tuesday as investors grew more worried that the financial sector is still suffering badly from the credit crisis. The Dow Jones industrials dropped more than 100 points, bringing their two-day loss to 235.
The market was treading water for much of the session, then tumbled in early afternoon as concerns about financial companies intensified. Reports that Lehman Brothers Holdings Inc. planned to raise $4 billion in capital expanded into a rumor on trading desks that the investment bank approached the Federal Reserve to borrow money.
Lehman ireasurer Paolo Tonucci quickly disputed the speculation, but the damage had already been done. Lehman dropped as much as 14.5 percent and dragged down other banks and brokerages and ultimately the rest of the market along with it.
“This market’s very jittery and nervous, and a lot of times you’ll see wild moves, wild gyrations, when it’s driven by rumors and innuendo,” said Jim Herrick, manager of equity trading at Baird & Co., who added that the rumors reminded investors of Bear Stearns’ near- collapse in March.
The Lehman rumors followed a spate of bad news about other financial companies Monday, including a downgrade of the nation’s four biggest investment banks by rating agency Standard & Poor’s. Separately, anxiety about weak May auto-sales figures and fresh concerns about inflation also cut into investors’ appetite for stocks.
The Dow fell 100.97, or 0.81 percent, to 12,402.85, after being down more than 160 points earlier. Broader market indexes were also lower. The Standard & Poor’s 500 index dropped 8.02, or 0.58 percent, to 1,377.65, while the Nasdaq composite index fell 11.05, or 0.44 percent, to 2,480.48.
Early in the session, comments from Federal Reserve Chairman Ben Bernanke seemed to support the market. In a speech via satellite to a conference in Barcelona, Spain, the Fed chief reiterated his belief that the economy will rebound in the second half because of interest-rate cuts, Fed loans to banks and tax rebates.
Government debt was mixed amid expectations that interest rates will be placed on hold. The 10-year Treasury note’s yield, which moves opposite its price, was at 3.89 percent, down from 3.97 percent late Monday.
“There’s still some more bad news to come on credit and the economy, but I think it’s positive that most people think we’re past the peak of the crisis,” said Alexander Paris, a market analyst.
