(Updates to close)
By Ellis Mnyandu
NEW YORK, March 6 (Reuters) - U.S. stocks tumbled on
Thursday after a series of fresh jolts to credit markets and
lackluster retail sales compounded worries the economy is near
recession, driving the benchmark Standard & Poor's 500 down
2.2 percent to its lowest closing level in 18 months.
Investors stormed out of stocks and into the perceived
safety of government bonds at a pace last seen in mid-January
just before the U.S. Federal Reserve stepped in with an
emergency interest-rate cut.
A main catalyst for the move was news that Thornburg
Mortgage Inc <TMA.N>, a "jumbo" mortgage lender, was in
default after failing to meet creditor demands for more
upfront cash. Thornburg shares plunged 51.5 percent to $1.65.
A report showing that U.S. mortgage foreclosures hit a
record high in late 2007 added to the gloom, sending the S&P
financial index <.GSPF> down 3.7 percent in its sixth straight
daily decline.
Shares of Citigroup Inc <C.N>, the largest U.S. bank by
assets, led financial-sector drags on the S&P 500 with a drop
of 4.4 percent. Shares of insurer American International Group
Inc <AIG.N> slid 3.9 percent and were the heaviest financial
weight on the Dow.
"We are dealing with a market that at this point is still
very, very jittery, wondering what's going to come out of the
closet next," said Frederic Dickson, senior vice president and
market strategist at D.A. Davidson & Co in Lake Oswego,
Oregon.
"Investors seem to be moving to the safest instruments
around or just diving into their fox holes. This looks pretty
much like an across-the-board sell-off."
The Dow Jones industrial average <> slid 214.60
points, or 1.75 percent, to 12,040.39. The Standard & Poor's
500 Index <.SPX> tumbled 29.35 points, or 2.20 percent, to
1,304.35. The Nasdaq Composite Index <> fell 52.31
points, or 2.30 percent, to 2,220.50 -- its lowest close since
September 2006.
The S&P 500, which is off 16.7 percent from its record
closing high in October, sank below its previous 2008 closing
low set on Jan. 22 when the U.S. Federal Reserve made an
emergency interest-rate cut in its efforts to ease credit
market strains and get a sputtering economy going.
Thornburg Mortgage said it had received a letter from
JPMorgan Chase & Co <JPM.N> notifying it of a default after it
failed to meet a margin call of about $28 million.
Wall Street's sell-off came a day before the scheduled
release of the government's non-farm payrolls report, expected
to show the U.S. job market probably rebounded in February
from the previous month's contraction, but not enough to keep
the unemployment rate from rising.
Economists expect the report due on Friday to show
non-farm payrolls rose by 25,000 in February, recovering from
a drop of 17,000 in January. However, the estimates for
February ranged widely from a fall of 110,000 to a rise of
100,000. For details, see []
The price of the benchmark 10-year U.S. Treasury note
<US10YT=RR> jumped 22/32 to 99-6/32, while its yield slid to
3.59 percent from 3.68 percent late on Wednesday as
risk-averse investors snatched up government bonds. The
two-year note's yield fell below 1.50 percent for the first
time since March 2004.
Adding to concerns about the financial sector, a
Dutch-listed affiliate of private equity firm Carlyle Group
said it has not been able to meet some margin calls and has
received a notice of default.
Shares of Citigroup ended at $21.17 on the New York Stock
Exchange as the largest U.S. bank by assets said it aims to
cut its home loan exposure by $45 billion, reduce risk and
save $200 million a year in an overhaul of its U.S.
residential mortgage business.
Shares of AIG, the world's largest insurer, finished at
$42.88, just a nickel above a five-year low.
Shares of JPMorgan, the No. 3 U.S. bank, ended down 3.4
percent at $37.37, while shares of Bank of America Corp
<BAC.N>, the No. 2 U.S. bank, fell 2.7 percent to $36.52.
The Mortgage Bankers Association said U.S. home
foreclosures and the rate of homes entering foreclosure hit
record highs in the fourth quarter of 2007.
Shares of hard-hit bond insurer Ambac Financial Group
<ABK.N> dropped 14.7 percent to $7.42. Ambac's slide followed
concern that the company's plan to raise capital may not give
it enough cash to shore up its credit-worthiness in the long
run.
Banks have made a firm commitment to buy more than $500
million of Ambac's shares in a planned $1.5 billion offering
-- if other investors don't buy them, according to a person
briefed on the matter.
Before the opening bell, Goldman Sachs cut price targets
on the shares of Ambac and another bond insurer MBIA Inc
<MBI.N>. Goldman also said Ambac's capital plan announced
Wednesday would fall $1 billion short of an estimated
requirement. MBIA shares dropped 5.5 percent to $11.60.
Shares of U.S. home finance companies Fannie Mae <FNM.N>
and Freddie Mac <FRE.N> fell to their lowest levels in more
than a decade as concerns about fallout from the housing slump
rattled investors. Fannie Mae dropped 10.7 percent to $21.70
and shares of Freddie Mac tumbled 6.9 percent to $20.14.
Four mortgage real estate investment trusts, or REITs,
ranked among the biggest decliners on the New York Stock
Exchange, including Anworth Mortgage Asset Corp <ANH.N>. Its
shares plunged 29.6 percent to $6.23.
Only one of the Dow's 30 components finished higher.
Wal-Mart Stores Inc <WMT.N> stock rose 0.8 percent to $49.98
after the world's largest retailer beat sales estimates.
Volume was moderate on the New York Stock Exchange, where
about 1.62 billion shares changed hands, below last year's
estimated daily average of 1.9 billion shares. On the Nasdaq,
about 2.23 billion shares traded, above last year's daily
average of 2.17 billion.
Declining shares outnumbered advancing ones on the NYSE by
a ratio of about 7 to 1, while on the Nasdaq, about four
stocks fell for every one that rose.
(Reporting by Ellis Mnyandu; Editing by Jan Paschal)
