By Justin Grant
NEW YORK (Reuters) - Stocks fell on Wednesday as
plunging gold and oil prices drove energy and mining shares lower,
and speculation that Merrill Lynch & Co may need to take more
write-downs deflated growing optimism that the credit crisis was
abating.
The drop of more than 2 percent in all three major stock indexes
came a day after the S&P 500 rang up its biggest one-day jump
in more than five years following stronger-than- expected earnings
from investment banks and the Federal Reserve's deep cut in
official interest rates.
Gold prices slid in their biggest one-day drop in nearly two
years and oil posted its worst slide in seven months, weighed down
by persistent worries about the U.S. economy's health. The Standard
& Poor's index of materials stocks dropped 6.3 percent.
A lawsuit filed by Merrill Lynch (MER.N:
Quote,
Profile,
Research) against a bond
insurer fanned speculation the big broker and investment bank may
not have enough protection against losses from its exposure to
securities at the heart of the credit crisis. That may lead to more
write-downs.
"Commodities are also getting tanked here. That's a positive for
the market, but it also hurts energy and other stocks," said Todd
Leone, head of listed trading at Cowen & Co. in New York. "We
had a great rally yesterday and probably came too far. There are
rumors about Merrill. All brokerage stocks are down."
The Dow Jones industrial average .DJI sank 293.00 points, or
2.36 percent, to 12,099.66. The Standard & Poor's 500 Index
.SPX dropped 32.32 points, or 2.43 percent, to 1,298.42. The Nasdaq
Composite Index
.IXIC shed 58.30 points,
or 2.57 percent, to 2,209.96.
Shares of Merrill Lynch fell 11.1 percent to $41.45, a drop that
Joe Saluzzi, co-manager of trading at Themis Trading, attributed to
rumors about further write-downs.
"Either way something stinks over there and the way the market
has been lately ... people shoot first and ask questions later.
Nothing has been verified by anybody," Saluzzi said.
FEAR FACTOR
Energy shares were among the biggest drags on the market as the
price of oil slid nearly $5 a barrel after worries about the
economy overshadowed bullish weekly data.
An index of energy shares fell 5.4 percent -- its biggest
one-day percentage drop since October.
Exxon Mobil shares were the S&P's biggest laggard, falling
4.6 percent to $84.43, while ConocoPhillips (COP.N:
Quote,
Profile,
Research) slid 6 percent to $73.61 and Chevron (CVX.N:
Quote,
Profile,
Research) fell 4.9 percent to $81.89.
Meanwhile, the Chicago Board of Options Exchange Volatility
Index .VIX -- Wall Street's favorite fear gauge -- jumped 15.7
percent a day after its fourth-biggest daily drop in 14 years.
Shares of Alcoa Inc (AA.N:
Quote,
Profile,
Research) fell 7.7 percent to $35.62 and Caterpillar Inc
(CAT.N:
Quote,
Profile,
Research) dropped 4.1 percent to $73.73.
A bright spot, though, was provided by the housing sector.
Shares of Fannie Mae (FNM.N:
Quote,
Profile,
Research) climbed 8.8 percent to $30.71, while Freddie
Mac (FRE.N:
Quote,
Profile,
Research) shot up 14.9 percent to $29.90 after they won
approval to pump $200 billion into the distressed U.S. housing
market.
Trading was heavy on the New York Stock Exchange, with about
1.97 billion shares changing hands, above last year's estimated
daily average of roughly 1.90 billion, while on Nasdaq, about 2.32
billion shares traded, above last year's daily average of 2.17
billion.
Declining stocks outnumbered advancers by a ratio of more than 2
to 1 on both the NYSE and the Nasdaq.
(Additional reporting by Caroline Valetkevitch and Ellis
Mnyandu; Editing by Jan Paschal)
http://www.reuters.com/article/hotStocksNews/idUSN1663304120080319?pageNumber=2&virtualBrandChannel=10150
