Stocks Fiddle as Subprime Burns

The familiar and sad story of the subprime mortgage business weighed down the stock market Thursday after HSBC Holdings (HBC Quote) reported that it miscalculated the risk of its subprime lending program.

But the subprime mortgage market's woes are not new, and the spillover from bad loans into consumer spending has been and is expected to be small. Indeed, Thursday's reports of strong January retail sales were the perfect foil for the bears' hackneyed argument that the subprime mortgage market could tank the broad economy.

"There is a perception in the market that maybe housing isn't turning as much as we'd hoped, but two weeks from now, it'll probably be the opposite," says Michael Driscoll, director of listed trading at Bear Stearns. "Today, housing is a wet blanket." ...