Street falls on credit market concerns

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NEW YORK -- Stocks tumbled Thursday as renewed concerns about the credit markets and a spike in home foreclosures intensified the market's worries about a sagging economy. The Dow Jones industrials fell more than 125 points.

Worries about credit moved to the fore of Wall Street's concerns after Thornburg Mortgage Inc. and a Carlyle Group bond fund disclosed troubles with investments backed by mortgages. The entities failed to make margin calls, payments to guarantee much larger debt or investments.

The genesis of the credit concerns that erupted last year -- souring mortgage loans -- again added to investors' worries after the Mortgage Bankers Association reported that home foreclosures hit an all-time high in the fourth quarter.

Wall Street's sense that credit concerns appear to be seeping further into areas of the financial sector once seen as likely to avoid being tainted by bad debt weighed on financial stocks and the broader market.

"I think these are near-term, unfortunate events that if they had the luxury of time and capital they could probably weather but unfortunately with this leverage-based system we have, time is a very expensive luxury," Jack Ablin, chief investment officer at Harris Private Bank in Chicago, said in reference to the difficulties at Thornburg and Carlyle.

In midday trading, the Dow fell 129.68, or 1.06%, to 12,125.31.

Broader indexes also retreated. The Standard & Poor's 500 index fell 17.53, or 1.31%, to 1,316.17; and the Nasdaq composite shed 18.59, or 0.82%, to 2,254.22.

Investors found little to celebrate as the dollar sinks to new lows against the euro. The greenback's weakness helped drive oil prices further into record territory and gold -- regarded as a defensive investment -- hovered near the psychological benchmark of $1,000 an ounce. Decisions by both the European Central Bank and the Bank of England to leave interest rates unchanged could place added pressure on the dollar.

Light, sweet crude rose to a fresh record Thursday after an unexpected decline in U.S. crude supplies and a widely expected decision by OPEC not to increase production. Oil recently slipped 68 cents to $103.84 per barrel.

Wall Street appeared to take an upbeat report from Wal-Mart Stores Inc. as a mixed message. While Wal-Mart reported stronger-than-expected sales for February, some investors are worried that success at the world's largest retailer reflects increased bargain-hunting by consumers. Reports from retailers such as J.C. Penney Co. and Limited Brands Inc., the parent of the Victoria's Secret and Bath & Body Works chains, indicated consumers are paring some spending that they don't deem essential.

Wal-Mart was one of only a few stocks among the 30 that comprise the Dow industrials to advance. The shares rose 73 cents to $50.28. J.C. Penney fell $3.30, or 6.9%, to $44.81, while Limited declined 37 cents, or 2.4%, to $14.98.

A retrenchment among consumers is an alarming prospect for Wall Street as consumer spending accounts for more than two-thirds of U.S. economic activity.

Investors' fear of becoming ensnared in widening credit troubles weighed on the financial sector. Thornburg plunged $2.04, or 60%, to $1.36. Stock in Amsterdam-listed Carlyle Capital Corp. Ltd., a bond fund managed by private equity firm Carlyle Group, fell more than 50% after saying it received a note of default for missed margin calls.

Other financial stocks retreated. Lehman Brothers Holdings Inc. fell $2.12, or 4.4%, to $45.94, while Merrill Lynch & Co. declined $2.96, or 6%, to $46.37. Washington Mutual Inc. fell 84 cents, or 6.6% $11.96.

Declining issues outnumbered advancers by about 5 to 1 on the New York Stock Exchange, where volume came to 610.3 million shares.

The Russell 2000 index of smaller companies fell 10.66, or 1.56%, to 673.08.

Overseas, Japan's Nikkei stock average closed up 1.88%. Britain's FTSE 100 fell 1.22%, Germany's DAX index declined 1.38%, and France's CAC-40 closed down 1.65%.
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