Stocks mostly lower as credit, profit worries escalate
NEW YORK -- Wall Street turned mixed in volatile trading Monday as investors pulled away from stocks amid worries about the credit and housing markets and disappointing corporate earnings.
The market remained uneasy although several companies including drug maker Merck & Co. and toymaker Hasbro Inc. reported decent third-quarter results. Investors were still mindful of the downbeat profit outlooks from some blue chip companies and Standard & Poor's downgrade of another series of mortgage-backed securities; those developments sent stocks plunging Friday, taking the Dow Jones industrials down 366 points.
Over the weekend, the world's economic leaders not only said that calming the turbulent global financial markets will require vigilance, but they also warned of inflation risks Ã¢â‚¬â€ť which puts central banks like the U.S. Federal Reserve in a tight spot. The Fed lowered interest rates on Sept. 18 to make borrowing cheaper amid a growing credit market crisis, and Wall Street hopes policy makers reduce rates again when they meet next week.
Fed Governor Randall Kroszner at a speech in Washington reaffirmed that the central bank will "act as needed" to calm the financial markets, according to Dow Jones Newswires. He also said problems with structured credit products Ã¢â‚¬â€ť which dampened the profits at several banks in the third quarter Ã¢â‚¬â€ť are recovering, but gradually.
The Dow was off 57.55, or 0.43 percent, at 13,464.47 in the first hour of trading, after falling more than 100 points in the opening minutes.
The S&P 500 index was down 4.48, or 0.30 percent, at 1,496.15.
But the Nasdaq composite index was up 3.17, or 0.12 percent, at 2,728.33, as bargain hunters snapped up tech stocks.
Overseas markets were also unsettled. In Asian trading, Japan's Nikkei stock average declined 2.24 percent, while Hong Kong's Hang Seng index dropped 3.7 percent. In European trading, Britain's FTSE 100 fell 1.43 percent, Germany's DAX index fell 1.20 percent, and France's CAC-40 fell 1.36 percent.
Treasury bonds slipped as investors cashed in on Friday's steep gains. The yield on the 10-year note, which moves inversely to its price, rose to 4.41 percent from 4.40 percent late Friday.
On Friday Ã¢â‚¬â€ť the 20-year anniversary of the Black Monday crash Ã¢â‚¬â€ť investors sold off stocks and bought up safer assets like U.S. Treasury bonds as the prospect of a thaw in the frozen credit markets grew dimmer.
The Dow finished last week down 4.05 percent; the S&P 500 index finished down 3.92 percent; and the Nasdaq composite index ended down 2.87 percent.
Most major companies reporting earnings Monday posted solid increases in income. Hasbro rose $1.29, or 4.5 percent, to $29.70 on its results, and Merck rose 11 cents to $53.22.
Schering-Plough Corp.'s profit gain fell short of expectations, however. The drug maker fell $2.71, or 8.3 percent, to $30.
Also giving the stock market pause, Lehman Brothers downgraded the mortgage finance sector and the specialty finance sector.
A pullback in oil and gold prices helped support stocks. Crude oil futures fell $1.27 to $87.33 a barrel on the New York Mercantile Exchange.
Also, the dollar rose against most other major currencies, except the yen.
In economic data Monday, the Chicago Federal Reserve's index of national business activity indicated that growth was below average in September for the second consecutive month.
In corporate news, investment bank Bear Stearns Cos. and Chinese bank Citic Securities Co. announced a deal to buy stakes in each other and create a Hong Kong-based joint venture that will offer markets servicing across Asia.