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Dow falls 180 points
Fears about Fannie, Freddie feed decline
AP File Photo
Lowe’s Cos. stock rose 4 cents yesterday to $24.54.
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Published: August 19, 2008
NEW YORK - Wall Street retreated yesterday after mortgage financiers Fannie Mae and Freddie Mac fell to their lowest levels in nearly 20 years on concerns that the government might need to bail them out. Weakness in the overall financial sector sent the Dow Jones industrial average down more than 175 points.
Investors were again uneasy about the health of financial companies after media reports of further problems in the sector. Barron's said that the U.S. Treasury might have to bail out government-chartered Fannie and Freddie, which, the weekly noted, would likely wipe out shareholders' equity in the companies.
Meanwhile, The Wall Street Journal, citing unidentified sources, reported that Lehman Brothers Holdings Inc. might surprise Wall Street with weaker-than-expected results for the third quarter.
The continuing bad news about financials wasn't a surprise, but it nonetheless depressed a market that is hoping for concrete signs that banks and brokerages can put the year-old credit crisis behind them and return to significant profit growth.
Even neutral news about the housing market couldn't ease Wall Street's mood. The National Association of Home Builders monthly index on the national housing market remained flat at 16 in August. That met the expectations of economists surveyed by Thomson Financial/IFR. Benchmarks related to current sales and expectations of future sales improved, but not enough to move investors to buy.
Todd Leone, the managing director of equity trading at Cowen & Co., said that the worries about Fannie and Freddie dominated market sentiment in an otherwise light day.
"It will be one of the slowest days of the year and I think it just kind of fed into itself," he said, referring to the effects of very light volume and the unease over the mortgage companies.
The Dow Jones industrial average fell 180.51, or 1.55 percent, to 11,479.39. The Dow had been down about 225 points at its lows of the session.
Oil prices declined slightly after briefly jumping above $115 a barrel as Tropical Storm Fay approached Florida, but appeared unlikely to disrupt installations in the Gulf of Mexico.
Light, sweet crude fell 90 cents to settle at $112.87 a barrel on the New York Mercantile Exchange, after rising as high as $115.35.
Crude's retreat -- by last week it had fallen more than $35 from its record high of $147.27 set July 11 -- has given the stock market a boost over the past month. But Wall Street has generally backtracked from its rallies amid continuing signs of problems among financial companies and also on unexpected signs of weakness in the economy.
In corporate news, Lowe's Cos., which is based in Mooresville, N.C., rose 4 cents to $24.54 after issuing a third-quarter forecast that came in below analysts' expectations, adding to investors' uneasiness about consumer spending and also about the housing market.
The home-improvement retailer, however, posted a smaller-than-expected decline in second-quarter profit, and raised its outlook for the year.
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