NEW YORK – U.S. stocks plunged today, in the worst week since early March for both the Standard & Poor’s 500 Index and Dow Jones Industrial Average, as fears grew of bank losses on mortgage bonds.
The Dow closed down 1.4 percent at 13,360.26, the S&P 500 lost 1.3 percent to 1,502.56 points and the Nasdaq Composite fell 1.1 percent to 2,588.96, according to Bloomberg News. (At 3:18 p.m., all three indexes had been down 1 percent, Bloomberg said.) For the week, the Dow and S&P 500 each lost about 2 percent, in their steepest drop since March 2, while the Nasdaq ended the week down 1.4 percent.
Banks and brokerages, led by Citigroup Inc., Bank of America Corp. and JP Morgan Chase & Co., contributed 28 percent of the drop in the S&P 500; Exxon Mobile Corp. and other energy producers led the Dow’s decline as natural gas prices hit a three-month low; and credit-rating service fell 62 cents to $63.37, in its third straight loss.
Bear Stearns Cos.’ struggle to limit the collapse of a hedge fund that has lost 20 percent this year – by taking out $3.2 billion in loans – spurred fears of writedowns of similar subprime-mortgage investments by banks, pension funds and other institutional investors. Bear Stearns shares lost $2.06 to close at $143.75.
“The demise of two Bear Stearns managed leveraged mortgage funds could be the tipping point of a broader fallout from subprime mortgage credit deterioration,” Bank of America analysts in New York wrote in a report published today. And Jack Kaplan, who helps manage $1.5 billion at Carret Asset Management in New York, told Bloomberg News: “When you see a hiccup like this, it’s a reminder that there are a lot of potential problems down the road. We may not understand fully what’s out there and we’re not going to know for sure until we have more time to really get a feel for … the possible implications.”
