Stocks fall as dollar slides
EmptyNEW YORK -- Stocks tumbled Thursday as investors recoiled at a further decline in the dollar, spikes in gold and oil prices and a warning that a Carlyle Group fund is near collapse. The major indexes each lost more than 1%; the Dow Jones industrial average at times fell more than 200 points.
Talk of regulatory changes for the mortgage industry did little to dislodge Wall Street's glum mood. Treasury Secretary Henry Paulson outlined a plan Thursday to provide stronger oversight of mortgage lenders, whose lax standards are blamed for touching off the concerns about souring debt that have led to turmoil in the credit markets.
Investors appeared doubtful that regulatory changes at this point would give the economy the immediate boost it needs. Consumers are paring back their discretionary spending by more than many anticipated -- a government report Thursday said retail sales fell in February after the market predicted an increase.
"Things just aren't good for the consumer, and thus, they're not good for Wall Street, said Kim Caughey, equity research analyst at Fort Pitt Capital Group.
Meanwhile, no one is positive which companies and which investors are going to end up losing money if more funds collapse. "It is going to be difficult to see who has the Old Maid card. And time will tell," Caughey said.
Carlyle's troubles heightened worries about the billions of dollars in depressed mortgage-backed securities. Carlyle Capital Corp., which is managed by Carlyle Group, warned late Wednesday it expects creditors will seize the fund's remaining assets after unsuccessful negotiations to prevent liquidation. World markets shuddered last week after the Amsterdam-listed fund missed margin calls from banks on its $21.7 billion portfolio of residential-mortgage-backed bonds.
The U.S. currency continues to tumble, while gold and energy prices keep surging. The dollar dropped the fresh lows against the euro and fell below 100 yen during Asian trading Thursday, the weakest level for the dollar against the Japanese currency in 12 years. Gold surpassed the psychological benchmark of $1,000 an ounce for the first time, and crude oil briefly passed $111 a barrel.
In mid-morning trading, the Dow fell 142.38, or 1.18%, to 11,967.86.
Broader stock indicators also fell. The Standard & Poor's 500 index lost 15.18, or 1.16%, to 1,293.59, and the Nasdaq composite index fell 27.63, or 1.23%, to 2,216.24.
Bond prices rose as stocks fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.42% from 3.44% late Wednesday.
Thursday's stock decline follows moderate losses Wednesday and a 416-point rally Tuesday. Those sharp gains followed a plan by the Federal Reserve -- and coordinated with other major central banks -- to lubricate near-frozen credit markets with an infusion of as much as $200 billion.
Analysts in the United States noted Wednesday that the U.S. housing market remains in tatters, while inflation is a growing threat to consumer spending that is already showing signs of weakness. While the Fed's plan to make more money available to financial institutions can help, it won't solve the many deepening economic problems in the United States.
The dollar's slide is of particular concern because it is helping to send commodities prices including oil to greater highs -- in turn feeding the growth of inflation.
Light, sweet crude 78 cents to $110.70 on the New York Mercantile Exchange, after briefly breaching $111 a barrel.
The Fed's Open Markets Committee meets next Tuesday and is widely expected to lower interest rates, with many analysts forecasting a drop of 0.50 percentage point. However, in the past few weeks investors have been questioning whether another rate cut will help the economy.
The Commerce Department's report of a 0.6% decline in retail sales for February was unnerving for investors because consumer spending accounts for more than two-thirds of U.S. economic activity. A pullback among consumers worried about jobs, falling home prices or rising energy costs could hasten the economy's slowdown.
In other economic findings, the Labor Department said the number of workers seeking unemployment benefits was unchanged last week. A government report released last week said employers cut payrolls by 63,000 in February -- the second straight month of losses -- and sent a wave of unease across Wall Street. Some economists regard back-to-back declines in monthly payrolls as a sign the economy won't be able to avoid recession.
Declining issues outnumbered advancers by nearly 5 to 1 on the New York Stock Exchange, where volume came to 501.8 million shares.
The Russell 2000 index of smaller companies fell 7.31, or 1.10%, to 660.00.
Overseas, Japan's Nikkei 225 index tumbled 3.3% to its lowest level in 2 1/2 years. In afternoon trading, Britain's FTSE 100 fell 2.11%, Germany's DAX index slid 2.60%, and France's CAC-40 lost 2.73%.