Updated from 10:54 a.m. EDT
An early selloff in New York stocks continued to grow midday Thursday as investors fled stocks following several downgrades in the financial sector.
Dow Jones Industrial Average
was sliding 221 points to 11,590, and the
was down 25 points at 1296. The
lost 60 points to 2340.
The financial sector was again in focus, in part because Goldman Sachs lowered its ratings on U.S. investment banks to neutral from attractive, a report said. Goldman added
to its "conviction sell" list, predicting $8.9 billion in second-quarter writedowns for Citi. Shares were dropping 5%.
also sold off after Bernstein cut its estimates on the brokerage, citing concerns about more writedowns.
The financial sector was suffering broadly at the hands of the downgrades.
were hit especially hard, down as much as 5% in early trading.
Today's selloff is due primarily to analysts' reduced expectations for the financials' second-quarter earnings, said Stuart Freeman, chief equity strategist at Wachovia Securities. "Obviously investors have been selling this news over and over again for at least a year now," he said. Freeman predicted a bottom for the market in the coming month as investors begin to look ahead to 2009 and a return to profitability. "It's going to be a slow, u
-shaped trudge back out of this," he said.
Goldman didn't stop with the financials, also lowering its opinion of
. Losing 11%, GM, along with fellow Dow component Citi, led the index downward. Every Dow stock but
was losing ground.
Weighing on the tech sector was
Research In Motion
, which said after the previous session's close that it
didn't meet first-quarter expectations
before then offering a soft outlook. Shares of the Blackberry maker were down 12%.
Similarly, business software seller
dropped 3.6% after
. Fourth-quarter results were good, but looking to the current quarter, Oracle cautioned that comparisons would be difficult.
Among the new day's earnings,
, the nation's second-largest homebuilder after
, reported another quarterly loss, although a narrower one than in the year-ago quarter. Prices for homes, along with orders, fell off.
Packaged food maker
also beat on earnings thanks to a solid performance by its trading and merchandising business, but delivered guidance that fell below consensus estimates.
Separately, a report in
The Wall Street Journal
said Budweiser maker
is set to turn down InBev of Belgium's $46 billion takeover attempt. Instead, the company will try to sell some assets to help lift its stock price.
announced this morning that it would attempt to cut costs by more than $2 billion by 2009 and work to capitalize on global growth opportunities.
In one bright spot, gold miners
led a rally in the materials stocks.
As for the data, the government issued its final reading on first-quarter gross domestic product, saying the economy grew 1% between January and March. That met estimates and was slightly above the 0.9% preliminary figure. Weekly initial jobless claims were little changed at 384,000, but were about 9,000 more than expected.
The National Association of Realtors said
rose to an annualized rate of 5 million from 4.99 million in April. The median price of an existing-home dropped 6.3% year over year to $208,600.
Commodity prices were for the most part higher. Oil was up $4.06 at $138.61 a barrel, and gold was jumping $33.90 to $916.20 an ounce. The dollar was down against the euro, the yen and the British pound.
"The recovery from the March lows to the May highs was a bear-market rally," said Phil Roth, chief technical market analyst at Miller Tabak. "I'm expecting another downleg." In a rally, he said, a decline in stock price should be followed by a decline in commodity prices, then a decline in long-term interest rates. "We're in step one" of that process, he said.
"Today is kind of wacky," said Roth. "The dollar is getting blasted. ... I can't find a commodity that's down."
Long-dated Treasury securities were rising slightly, with the 10-year up 14/32 in price, yielding 4.05%, and the 30-year bond adding 12/32 to yield 4.62%.
Overseas, most major markets fell. In Europe, London's FTSE and Frankfurt's DAX each surrendered more than 2%. Tokyo's Nikkei and Hong Kong's Hang Seng also pulled back.