NEW YORK - Wall Street tumbled Wednesday as investors grappled with renewed worries about the soundness of the financial sector. The major indexes fell more than two per cent, including the Dow Jones industrial average, which lost more than 230 points.
While many financial services companies logged steep declines during the session, government-sponsored lenders Freddie Mac and Fannie Mae were among those hardest hit. Investors are worried that the mortgage finance companies will have to sell more shares than anticipated to compensate for losses from the housing slump.
Merrill Lynch & Co. also dropped, after Fitch Ratings put its long-term credit default rating on watch for a possible downgrade.
With dismal bank and lender earnings expected in the coming weeks, investors were unable to keep buying a day after stocks, including financials, had logged sharp gains.
Selling accelerated amid light volumes, which tends to skew price moves.
The Dow fell 236.77, or 2.08 per cent, to 11,147.44.
The Standard & Poor’s 500 index fell 29.01, or 2.28 per cent, to 1,244.69, while the Nasdaq composite index fell 59.55, or 2.60 per cent, to 2,234.89.
The pullback left both the Dow and S&P 500 back in bear market territory, with both indexes having logged declines of more than 20 per cent since their October highs.
Bond prices edged higher Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.81 per cent from 3.89 per cent late Tuesday.
LONDON - European stock markets closed higher Wednesday in a rebound sparked by a sharp fall in oil prices and hopes the US Federal Reserve will continue to support banks hit by the US subprime home loan crisis.
Dealers said sharp gains on Wall Street on Tuesday, led by the banks on encouraging comments from Fed chairman Ben Bernanke, made for a solid day in Asia on Wednesday and set the stage for a European recovery too after very heavy losses.
They said the tone remained cautious however and the gains technical, with most markets down 20 percent or more since their late 2007 highs amid concerns there is more bad news to come for the banks on their subprime exposure.
In London, the FTSE 100 index closed up 89.1, or 1.64 per cent at 5,529.60.
FRANKFURT - The DAX index ended at 6,386.46 points, up 82.05, or 1.30 per cent.
PARIS - The CAC-40 index closed at 4,339.66 points, up 64.05, or 1.50 per cent.
TOKYO - Japanese shares closed 0.15 per cent higher Wednesday as Wall Street rallied on lower oil prices, but dealers said reports of an Iranian missile test could weigh on market sentiment.
The Tokyo Stock Exchange’s benchmark Nikkei-225 index firmed 19.03 points to end at 13,052.13.
HONG KONG - The benchmark Hang Seng Index finished 585 points up, or 2.8 per cent, at 21,805.81.
WELLINGTON - New Zealand shares consolidated Tuesday’s rebound, mirroring positive Australian and US markets.
The benchmark NZSX-50 closed up 16.87 points, or 0.5 per cent, to 3177.46 on turnover worth $NZ103 million ($A81.42 million).
SYDNEY - The Australian share market is expected to open lower today after US equities fell as investors grappled with renewed worries about the soundness of the financial sector.
At 0819 AEST on the Sydney Futures exchange, the September share price index futures contract fell 65 points to 4,929.
In economic news, the Australian Bureau of Statistics releases its labour force data for June.
The Westpac/Melbourne Institute index of consumer inflation expectations for June is also due.
In company news, thermal coal company APAC Coal lists.
CSR Ltd holds its annual general meeting.
United Group Ltd managing director Richard Leupen addresses the American Chamber of Commerce in Australia on “The Tale of Two Booms - Resources and Infrastructure.”
The Bennelong Australian Equity Partners launch is expected.
Yesterday, the Australian share market lifted as investors snapped up stocks that now look cheap after being beaten down on the back of higher oil prices, the global credit crunch and fears of an economic slowdown.
The benchmark S&P/ASX200 index gained 79 points, or 1.6 per cent, to 5011.9, while the broader All Ordinaries added 67 points, or 1.33 per cent, to 5089.4.
NYMEX
Oil prices finished about where they began Wednesday after jumping more than $US2 earlier on reports of lower US oil stockpiles and an Iranian missile test.
Light, sweet crude for August delivery rose a penny to settle at $US136.05 a barrel on the New York Mercantile Exchange, but prices shifted between positive and negative territory as traders parsed details of the inventory report following its midmorning release. In aftermarket trading, oil prices fell 40 cents to $US135.64 a barrel.
The moves follow two days of steep declines that left prices 6.4 per cent below last week’s record high.
Figures from the Energy Information Administration showed US oil supplies fell by 5.9 million barrels last week, a decline of two per cent. That is far above the 1.9 million barrels forecast by analysts surveyed by the energy research firm Platts.
In addition, gasoline stockpiles rose more than expected, partly offsetting the decline in crude. Inventories of distillate fuel, which include diesel and heating oil, also rose, but less than analysts anticipated.
Prices rose as high as $US138.28 earlier in the day following reports that Iran’s elite Revolutionary Guards fired missiles during war games that officials said were meant to show that the key oil producer can retaliate against a US or Israeli attack, state television reported.
Iran is the world’s fourth-largest oil producer and OPEC’s second-largest exporter. Oil traders fear any military conflict could prompt Iran to block the Strait of Hormuz, a passageway that handles about 40 percent of the world’s tanker traffic.
In other Nymex trading, heating oil futures fell 3.14 cents to $US3.8516 a gallon while gasoline futures lost 1.77 cents to $US3.3808 a gallon. Natural gas futures dropped 36.2 cents to $US12.006 per 1,000 cubic feet.
COMEX
Corn futures fell for a fourth day Wednesday on expectations that record-high prices for the grain will cut into demand for animal feed and ethanol. Soybeans rose sharply.
Other futures traded mostly higher, with gold, silver and copper all rebounding after a big two-day sell-off in commodities. Crude oil inched higher by a penny.
Corn prices rose to a record near $US8 a bushel last month as severe flooding swallowed huge swaths of farmland in the Midwest. A dose of warm, dry weather has helped dry out waterlogged crops in recent days, sending prices sharply lower.
Still, traders are betting corn’s rally will lead to a drop in demand from livestock owners, who rely on the grain as the chief ingredient in animal feed. Ethanol producers are also planning to scale back production because of the high price of corn, the main feedstock for the alternative fuel produce in the US.
In precious metals, gold futures rose slightly after the dollar fell against the euro, boosting demand for the metal as an inflation hedge.
Gold for August delivery rose $US5.30 to settle at $928.60 on the Nymex, after earlier rising as high as $US930.50.
In other Nymex trading, September silver rose 22 cents to settle at $US18.175 an ounce while September copper gained 4.25 cents to settle at $US3.739 a pound.
