Credit and economic jitters hit Wall Street
NEW YORK (Reuters) - U.S. stocks fell for a second straight day on Tuesday on concerns about the impact of the credit crisis on bank profits and the wider economy.
In a sign of growing unease about the credit squeeze and fallout from the housing slump, JPMorgan Chase (JPM.N) slashed its earnings outlook for four major Wall Street banks, fueling another sell-off in financial shares.
Shares of credit card company American Express (AXP.N) and of Goldman Sachs Group Inc (GS.N), the largest U.S. securities firm, led financials lower.
Home builders were another casualty, with the Dow Jones home construction index .DJUSHB sliding nearly 3 percent.
"The head wind for the market is the credit problem," said Gail Dudack, chief investment strategist at Dudack Research Group in New York.
"The other problems are all secondary to that one. If it weren't for the credit mess, I don't think we'd be talking about recession and be so focused on the Fed, and we wouldn't be worried about earnings."
The Dow Jones industrial average .DJI ended down 65.84 points, or 0.49 percent, at 13,248.73. The Standard & Poor's 500 Index .SPX dropped 9.63 points, or 0.65 percent, to 1,462.79. The Nasdaq Composite Index .IXIC closed off 17.30 points, or 0.66 percent, at 2,619.83.
FANNIE MAE SLASHES DIVIDEND
After the closing bell, Fannie Mae (FNM.N), the No. 1 U.S. home finance company, announced a 30 percent cut in its quarterly dividend and a $7 billion sale of preferred stock to shore up its capital through 2008.
Fannie Mae also warned that "conditions in the housing and credit markets, including expected further declines in home prices" will hurt its fourth-quarter and 2008 results. ID:nN04547954 Its shares dropped more than 2 percent from their New York Stock Exchange close of $35.18.
On Wall Street, investors were cautious as the focus shifts to the Federal Reserve's next rate-setting policy meeting on December 11.
Even though comments from key Fed officials, including Chairman Ben Bernanke, have boosted expectations for a reduction in rates in recent days, investors were unsure about the size of the cut.
Another drag in the regular session was a pullback in crude oil prices, which hit shares of energy companies such as Exxon Mobil Corp (XOM.N).
But shares of retailers, including Wal-Mart Stores Inc (WMT.N), rose as the drop in oil prices boosted hopes that receding gasoline prices will underpin holiday spending.
BANKS AND HOME BUILDERS WILT Continued...
