Stocks Drop on Subprime, Retail Worries
By MADLEN READ
AP Business Writer
March 13, 2007
NEW YORK — Stocks fell sharply in early trading Tuesday as investors grew unnerved that troubles for subprime lenders and a weaker-than-expected reading on retail sales signaled trouble for the economy.
Investors fled the already weakened stocks of subprime mortgage lenders as the sector's troubles spread. The New York Stock Exchange said shortly before the opening bell it would immediately suspend trading in shares of New Century Financial Corp. and move to delist the stock. The company, which saw trading in its shares halted throughout Monday's session, on Tuesday disclosed more details on the raft of financial hurdles it faces.
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Word from Accredited Home Lenders Holding Co. that it is grappling with a liquidity shortfall confirmed concerns that the sector's troubles are widespread. Without sufficient liquidity, the company cannot retain or sell the loans it originates.
The difficulty of subprime mortgage lenders, who make loans to those with poor credit, overshadowed a profit report from Goldman Sachs Group Inc. that came in well above Wall Street's forecast.
In the first hour of trading, the Dow Jones industrial average fell 62.89, or 0.51 percent, to 12,255.73.
Broader stock indicators also fell. The Standard & Poor's 500 index fell 7.07, or 0.50 percent, to 1,399.53, and the Nasdaq composite index slid 12.16, or 0.51 percent, to 2,390.13.
Bonds rose amid the subprime lender concerns and a weak retail reading. The yield on the benchmark 10-year Treasury note fell to 4.51 percent from 4.56 percent late Monday. The dollar was mixed against other major currencies, while gold prices rose.
The economic data didn't offer support for bullish investors. The Commerce Department said sales at U.S. retailers rose 0.1 percent in February as wintry weather in much of the country kept shoppers away from stores. Investors had expected an increase of 0.3 percent from January.'
In corporate news, New Century said Tuesday that regulators subpoenaed documents under inquiries into accounting errors that inflated the value of the company's loan portfolio. The Irvine, Calif., company said the Securities and Exchange Commission and the U.S. Attorney's Office for the Central District of California began the investigations two weeks ago.
Accredited Home shares plunged $5.50, or 48 percent, to $6 after it disclosed its liquidity troubles.
Investors trying to determine the breadth of the problems in the subprime sector pounced on comments from Goldman Sachs. The investment bank said strength remained in mortgages and credit products during the quarter and that while the subprime sector showed "significant weakness," the broader credit environment "remained strong." Goldman Sachs rose $1.91 to $204.51 after posting a best-ever first-quarter profit amid strong revenue from trading and investment banking.
In other corporate news, Jo-Ann Stores Inc. jumped $3.29, or 14.4 percent, to $26.17 after the nation's largest fabric retailer issued a stronger-than-expected profit forecast.
The Russell 2000 index of smaller companies fell 6.17, or 0.78 percent, to 782.83.
Overseas, Japan's Nikkei stock average fell 0.66 percent. In afternoon trading, Britain's FTSE 100 fell 0.71 percent, Germany's DAX index fell 0.88 percent, and France's CAC-40 fell 0.78 percent.
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