Shaky economic outlook hits confidence as shares slip
NEW YORK (Reuters) - U.S. stocks dipped on Thursday as investors worried about the economic outlook after the head of the biggest U.S. mortgage company said the housing downturn could create a recession.
The remarks from Angelo Mozilo, chief executive of Countrywide Financial Corp CFC.N, quickly deflated an early rally following news that Bank of America Corp(BAC.N) had taken a $2 billion stake in the beleaguered mortgage provider.
Financial stocks were among those leading declines, with the sector bearing the brunt of dwindling investor confidence in recent weeks as fallout from the meltdown in subprime mortgages spread to other corners of the credit market.
JP Morgan Chase & Co. (JPM.N) declined 0.7 percent to close at $45.67. By the end of the session, Countrywide shares had pared most of their gains on the Bank of America deal.
Mozilo's comments about a tough housing market underscored the need for the Federal Reserve to do more, said Phil Orlando, chief equity market strategist at Federated Investors, in New York.
"The Fed has cut the discount rate and added liquidity to the markets, but those things aren't enough to turn the fundamental market around," Orlando said.
The Dow Jones industrial average .DJI inched down just 0.25 of a point to end at 13,235.88. The Standard & Poor's 500 Index .SPX slipped 1.57 points, or 0.11 percent, to 1,462.50. The Nasdaq Composite Index .IXIC shed 11.10 points, or 0.43 percent, to 2,541.70.
Mozilo, speaking on CNBC television, said the housing market was "certainly not getting better" and could push the economy into a recession. He also said the commercial paper market isn't improving.
Adding to the negative tone was a Financial Times report that a private equity-led buyout of home improvement retailer Home Depot Inc's (HD.N) wholesale supply division could be in trouble. Home Depot's shares fell 2.2 percent to $34.02.
Stocks started the day on a positive note after news late Wednesday of Bank of America's investment of $2 billion in Countrywide. Analysts said it would help shore up the mortgage lender's finances as Countrywide struggles with a liquidity crunch.
Last week, Countrywide tapped into an entire $11.5 billion credit line.
Shares of Countrywide rose 0.9 percent to end at $22.02, after rising as much as 11.1 percent early in the day on the New York Stock Exchange.
The S&P index of financial shares .GSPF fell 0.5 percent. Shares of Citigroup Inc (C.N) inched down 0.2 percent to $48.35.
Bank of America shares rose 0.4 percent to $51.83.
On the Nasdaq, shares of Apple Inc. (AAPL.O), down 1.1 percent at $131.07, led declines, giving up some of the gains from earlier in the week. Continued...
