Stocks skid again over credit market woes
NEW YORK -- Wall Street finished a turbulent week with another huge drop Friday after major banks warned of further losses on their debt portfolios, raising investor concerns that the credit market slump shows no sign of abating. The Dow Jones industrial average fell more than 220 points.
Bank of America Corp., JPMorgan Chase & Co. and Wachovia Corp. all said the ongoing credit crisis will cause another round of heavy losses during the fourth quarter. Financial institutions took big hits during the last quarter as losses from subprime mortgages hurt their balance sheets, and these three companies were just the latest to report bad news that sent stocks lower.
BofA said continued "market dislocations," including those related to securities it owns that are backed by loans, will affect its fourth-quarter results. The bank did not provide an estimate of how large the impact will be. JPMorgan said difficult conditions may cause a fourth-quarter writedown, but did not say how much.
Wachovia, the nation's fourth-largest bank said it faced a $1.1 billion writedown for October alone. Investors also were rattled by speculation that Barclays PLC was about to announce a $10 billion writedown, though the U.K. bank denied the rumors.
"The extent of the situation is unknown, and that uncertainty doesn't give investors any reasons to believe that a bottom might be in place," said Todd Salamone, director of trading and vice president of research at Schaeffer's Investment Research. "We just got more of the same this week rattling investors, and the question for investors becomes what's the next catalyst to drive stocks higher."
Further worries about the continuing credit market slump kept investors on edge a day after Federal Reserve Chairman Ben Bernanke said he expects the economy to "slow noticeably" this quarter.
He also said the dollar's weakness "may have some effect on import prices" -- which was confirmed Friday in new government data. The Commerce Department reported U.S. import prices soared last month at their fastest pace since early last year.
Meanwhile, the University of Michigan's preliminary November consumer sentiment index tumbled for its weakest performance since October 2005.
Financial stocks were among the hardest hit Friday, though the banks that warned about the fourth quarter finished mostly flat amid hopes that their announcements might be signaling the end of the current period's trouble. BofA rose 49 cents to $43.99, JPMorgan fell 32 cents to $42.29, and Wachovia was up 31 cents at $40.61.
Investors were uneasy about tech stocks after Qualcomm Inc., the nation's second-biggest maker of chips that run mobile phones, predicted that heightened competition and legal troubles will cause 2008 results to fall 4 percent to 7 percent below Wall Street projections.
Qualcomm fell $1.66, or 4.2 percent, to $38.10.
Cisco Systems Inc. was another drag on the technology sector. It fell $1.05, or 3.5 percent, to $28.58 after the company warned of a dramatic decline in domestic business orders.
Merck & Co. said it will pay $4.85 billion to settle thousands of lawsuits over its painkiller Vioxx -- a move considered to be the biggest drug settlement ever. The offer was finalized early Friday as Merck and the plaintiffs met with three of the four judges overseeing the claims. Merck rose $1.13, or 2.1 percent, to $55.90.