NYT: Stocks Slide After Bank of America Disappoints
By THE ASSOCIATED PRESS Published: October 18, 2007 Filed at 1:05 p.m. ET
NEW YORK (AP) -- Wall Street retreated Thursday after Bank of America Corp. missed analysts' earnings expectations and provided investors with further evidence of how the credit crisis has hurt the economy.
BofA, considered a bellwether for the banking industry because it has branches across the country, said ''significant dislocations'' in the capital markets sent third-quarter profits down 32 percent. The disappointing results follows similar reports from other financial companies including Citigroup Inc. and Washington Mutual Inc.
Banks and brokerages have been hurt during the third quarter in the fallout from the subprime mortgage crisis. As people with weak credit defaulted on loans at an alarming rate, it triggered a global aversion for risk that led the credit markets to freeze up.
Treasurys rallied and the dollar fell to a new low against the euro after the Labor Department said the number of newly laid off workers filing claims for unemployment benefits shot up last week by the largest amount since February. The report was far worse than economists expected, and signaled that the labor market could be starting to weaken from a downturn in housing and the global credit turmoil.
''There are so many factors going on right now between the dollar getting crushed, oil moving higher, and news out of the banking sector,'' said Greg Church, chief investment officer of Church Capital Management. ''Yet, it is amazing to me that this market continues to lift its head. The market came back somewhat because there's that whole camp that thinks any bad news is good news that the Fed will lower rates.''
In early afternoon trading, the Dow Jones industrial average fell 30.73, or 0.22 percent, to 13,861.81. The blue chip index, which declined for the fourth straight session, was down more than 60 points earlier.
Broader indexes were also lower. The Standard & Poor's index fell 5.89, or 0.38 percent, to 1,535.35, while the Nasdaq composite index was down 9.85, or 0.35 percent, at 2,782.82.
The yield on the benchmark 10-year Treasury note, which moves inversely to prices, fell to 4.51 percent from 4.55 percent late Wednesday. Treasury prices rose again after rallying sharply Wednesday amid growing signs of trouble in the housing sector.
Also, the Philadelphia Federal Reserve reported that its October manufacturing index came in weaker than expected. The report showed a slowdown in growth for the regional economy, and some inflationary pressures.
Sluggish economic data could help motivate the U.S. Federal Reserve to cut interest rates at its Oct. 30-31 meeting. Central bankers cut rates by a half point at their September meeting.
Oil prices continued their advance due to further tensions between Turkey and Kurdish rebels in Northern Iraq. A barrel of light, sweet crude for November delivery rose 88 cents to $88.28 a barrel on the New York Mercantile Exchange.
Disappointing results from BofA made the market wary about other upcoming earnings reports, including Google Inc. and Advanced Micro Devices Corp. after the closing bell.
About 60 members of the Standard & Poor's 500 index have reported quarterly results so far this week. Most of the attention has been on the nation's biggest banks, which reported mostly disappointing results on write-downs from leveraged loans, mortgages, and consumer credit.
Bank of America said capital markets losses offset growth in other businesses, and the company doubled its loan-loss provisions. This caused net income to decline to 82 cents per share from $1.18 a year earlier -- a big miss considering analysts polled by Thomson Financial projected a profit of $1.06 per share.
Shares of the Charlotte, N.C.-based bank fell $1.72, or 3.4 percent, to $48.31.
Washington Mutual tumbled $2.83, or 8.6 percent, to $30.24 after it reported quarterly profit plunged 72 percent. The nation's largest thrift blamed the drop on sagging home prices, which made it harder for borrowers to pay their bills and hurt the value of their mortgage loan portfolio.
E-Trade Financial Corp. late Wednesday reported an unexpected loss because of its exposure to credit markets. The discount brokerage took a $200 million write-down linked to mortgage-related investments, and its shares tumbled 94 cents, or 7.6 percent, to $11.52.
Pharmaceutical stocks were weaker after Pfizer Inc. said third-quarter profit plunged due to a $2.8 billion pretax charge to end investment in the inhaled insulin drug Exubera. The world's largest drug company also had lower sales of blockbuster cholesterol drug Lipitor. The stock rose 8 cents to $24.63.
The Hershey Co., the nation's largest candy maker, said profit tumbled 66 percent because of lower sales and higher promotional costs. The maker of Hershey's Kisses and Reese's candy missed Wall Street projections, and shares fell $1.51, or 3.4 percent, to $42.78.
The Russell 2000 index of smaller companies fell 3.01, or 0.36 percent, to 821.88.
Declining issues led advancers by a 5 to 4 basis on the New York Stock Exchange, where volume came to 576.9 million shares.
Overseas, Japan's Nikkei stock average closed up 0.89 percent. Britain's FTSE 100 fell 1.10 percent, Germany's DAX index fell 0.76 percent, and France's CAC-40 fell 0.98 percent.
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