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Wall Street Falls Hard

Robert Holmes

Stocks closed sharply lower Thursday as the assassination of Benazir Bhutto and weaker-than-expected domestic economic data kept buyers sidelined all session.

The Dow Jones Industrial Average was down 192.08 points, or 1.42%, to 13,359.61, while the S&P 500 lost 21.39 points, or 1.43%, to 1476.27. The Nasdaq Composite was off 47.62 points, or 1.75%, at 2676.79.

Breadth was decidedly negative. On the New York Stock Exchange, 2.31 billion shares changed hands, and volume on the Nasdaq reached 1.40 billion shares. Losers outpaced winners 3 to 1.

Equities were under pressure in part because of violence in south Asia, where Bhutto, the Pakistani opposition leader and former prime minister, was killed by a gunman and bomber at a political rally.

Gold futures topped $830 an ounce and crude oil closed in on $97 a barrel after the news of her death. U.S. Treasury prices rallied, as well, with the 10-year note rising 22/32 in price, yielding 4.19%. The 30-year bond jumped 1-6/32 in price, yielding 4.60%.

There was also disappointment on the economic front after the Commerce Department said durable goods orders rose an anemic 0.1% last month, compared with expectations of a 2.5% increase.

In another report, the Labor Department said initial jobless claims unexpectedly rose by 1,000 claims last week to 349,000 claims. Economists had expected claims would fall to 340,000. The four-week moving average slipped by 1,000 to 342,500.

A slight bit of good news came from the Conference Board, whose December consumer confidence index rose to 88.6 from a revised 87.8 in November. Economists anticipated a slight decline to 87.

"There's been a whole series of bad news coming out, and given thin holiday volume, it's easy to push the market down," said Edgar Peters, chief investment strategist with Pan Agora. "There's a bad negative tone as the economic data are weak, but isn't weak enough to ensure a [Federal Reserve] rate cut. It's simply a buyer's strike today."

Financials were in the spotlight after Goldman Sachs increased its writedown projections for Citigroup (C Quote), Merrill Lynch (MER Quote) and JPMorgan Chase (JPM Quote). The firm now expects a combined $33.6 billion in fourth-quarter writedowns to be announced.

Citigroup finished down 2.9%, Merrill was off 2.5%, and JPMorgan shed 2.9%. Subsector indices retreated, with the Amex Securities Broker/Dealer Index falling 2.1% and the NYSE Financial Sector Index decreasing 1.6%.

Elsewhere, Fitch Ratings said it has placed the credit ratings for residential mortgage-backed securities backed by bond insurers on watch for a possible downgrade.

Among those that could be affected are 87 securities insured by MBIA (MBI Quote), 64 by Ambac Financial (ABK Quote) and 19 by Security Capital Assurance (SCA Quote). MBIA was 0.7% higher, while Ambac and Security Capital gave up ground.

Also in the sector, shares of SLM Corp. (SLM Quote), commonly known as Sallie Mae, ended down 11.2% after the lender said it will sell $2.5 billion in common stock in order to buy out certain liabilities. SLM dropped $2.48 to $19.65.

Shares of Apple (AAPL Quote) hit a record $202.96 before ending down 38 cents, or 0.2%, to $198.57. The move came after the stock crossed the $200 level for the first time during the prior session.

Following the close, the company said it has a deal in place with News Corp. (NWS Quote) to offer movie rentals over the Internet through its iTunes digital media service.

Overseas markets were mixed. Hong Kong's Hang Seng slipped 1%, and Japan's Nikkei lost 0.6% overnight. Among European bourses, London's FTSE 100 tacked on 0.3%, and Germany's Xetra Dax rose 0.5%.