Updated from 10:50 a.m. EDT
Stocks in New York opened Monday on a downbeat and continued falling deeper into negative territory after the release of existing-home sales data and uncertainty about the fate of several struggling financial-services companies left investors in a selling mood.
Dow Jones Industrial Average
gave back 212 points to 11,416, and the
slipped 22 points at 1270. The
skidded 47 points to 2367.
On Friday, the markets closed with substantial daily gains following a report that troubled brokerage
may have found a buyer in Korea Development Bank. Traders were also encouraged by statements from
Chairman Ben Bernanke that suggested the central bank would not be raising interest rates before the end of the year.
Before the new week's trading got underway, Korean financial regulators let some air out of the Lehman news, saying that Korea Development Bank should be careful when making such a risky purchase. Shares of Lehman were down 7.5%.
, another focal point of the credit crunch, saw shares rise 10% early on Monday after the firm successfully sold $2 billion worth of three-month and six-month bonds. During the previous week, a less successful bond sale had investors worrying about the company's ability to raise capital.
Hugh Johnson, chief investment officer at Johnson Illington Advisors, says that
, Freddie Mac and Lehman Brothers remain among the chief concerns of investors and portfolio managers. He said he foresees a government bailout of Fannie and Freddie. "The question is when."
Johnson also pointed out that many traders are away on vacation this week, which makes it difficult for the market to find direction. "It's going to be a trendless and volatile week, and very news-sensitive," he said.
Elsewhere in the financials, Fitch Ratings said insurance company and Dow member
may be set for a credit-rating downgrade as the agency continues to assess its business. Credit Suisse piled on, lowering earnings estimates for the company.
Along with AIG, financial firms
Bank of America
were dragging the Dow lower. None of the index's 30 components was marking gains.
Morgan Stanley also predicted that further writedowns stemming from the credit crunch and weakened earnings from the economic slowdowns would hurt the S&P 500's performance.
Concerns were exacerbated by the closure of Columbian Bank of Kansas. On Friday, the Federal Deposit Insurance Corp and Kansas regulators seized the bank. Columbian, which had $752 million in assets and $622 million in deposits as of June 30, is the ninth bank to fail in 2008.
Among analyst actions, Citigroup cut its rating on
to sell from buy on worries that the company's resilience against FiOS technology will be hard to maintain.
agreed to buy the
Advanced Micro Devices'
digital TV segment for $192.8 million in cash.
In commodities, crude oil was up 17 cents to $114.76 a barrel, and the price of gasoline was at $3.68 a gallon, meaning it's now down 30 cents from a month ago. Gold was losing $6.40 to $827.10.
As for economic data, the National Association of Realtors' existing-home sales report came in at an annualized rate of 5 million units in July, vs. 4.85 million in June and ahead of analyst expectations. Inventories, however, rose 3.9% to 4.67 million units, a record level, and home sales fell 13.2% year over year, and the median home price fell 7.1% from a year ago.
"The real issue with whether you're talking existing-home sales or new-home sales is the inventory overhang," says Johnson Illington's Hugh Johnson. He pointed out that the inventory overhang remains high. "Until that comes down, we're not going to see any relief from the downward pressure on prices."
Longer-dated U.S. Treasury securities were gaining value. The 10-year was up 25/32 to yield 3.78%, and the 30-year was tacking on 1-12/32, yielding 4.38%. The dollar was softening against its major foreign competitors.
Overseas, European exchanges were mixed, while Asia posted gains. The FTSE in London was gaining substantially, and the Dax in Frankfurt was losing ground. Japan's Nikkei and the Hang Seng in Hong Kong were both trading higher.