Stocks fall on mortgage defaults
NEW YORK (Reuters) - Stocks fell for a third straight session on Friday as concern over rising defaults in the subprime mortgage industry drove down financial services shares and the price of oil hit a 2007 high.
Shares of NovaStar Financial Inc. NFI.N and New Century Financial Corp. NEW.N, two of the major names in the business of making home loans to Americans with shaky credit, extended declines from earlier in the week. That trend spilled over to bigger names in the home loan business like Countrywide Financial Corp. CFC.N, Wells Fargo & Co. (WFC.N) and even blue-chip JPMorgan Chase & Co. (JPM.N)
Shares of Microsoft Corp. (MSFT.O) were the top-weighted drag on the S&P 500 and the Nasdaq Composite after a U.S. federal jury found the software maker infringed on audio patents held by Alcatel-Lucent and should pay $1.52 billion in damages.
Adding to jitters in the market, Vice President Dick Cheney said on Friday the United States retains all options in keeping Iran from acquiring nuclear weapons. But the White House stressed it was seeking a diplomatic solution.
"Oil rising above the $61 level will put a cap on the market for the short term," said John O'Brien, a trader at MKM Partners LLC in Cleveland, Ohio. "For financials, it's the fear of the subprime loan and the worry over how much a piece of their book relates to more exotic-type loans."
Subprime mortgages are the riskiest part of the U.S. home loan market, serving borrowers with poor credit histories at higher-than-average interest rates. Default rates have risen as the U.S. housing market has seen slowing sales and falling prices.
The Dow Jones industrial average .DJI fell 38.54 points, or 0.30 percent, to end at 12,647.48. The Standard & Poor's 500 Index .SPX dropped 5.19 points, or 0.36 percent, to finish at 1,451.19. The Nasdaq Composite Index .IXIC lost 9.84 points, or 0.39 percent, to close at 2,515.10.
For the week, the Dow fell 0.9 percent, its worst decline since August. The S&P 500 finished the week down 0.3 percent. But the Nasdaq marched to its own drummer and ended the week up 0.8 percent.
On the Nasdaq, Microsoft shares slid 1.7 percent, or 49 cents, to $28.90.
CRY, MY BELOVED COUNTRYWIDE
Shares of mortgage lenders continued to slide for a third straight day. The stock of Countrywide Financial Corp. CFC.N, the top U.S. mortgage lender, fell 2 percent, or 81 cents, to $39.33 on the New York Stock Exchange. Shares of Washington Mutual WM.N, the largest U.S. savings and loan, dropped 1.9 percent, or 84 cents, to $43.88.
NovaStar Financial's stock fell 9.2 percent, or 86 cents, to $8.48, while New Century Financial's stock lost 6.2 percent, or $1.02, to $15.52 in NYSE trading. They ranked near the top of the list of the Big Board's biggest percentage losers.
The S&P Financial Index .GSPF was down 1.1 percent, its sharpest decline since January 25.
Bank of America Corp. (BAC.N) shares slid 1.6 percent, or 84 cents, to $52.86, while Wells Fargo's stock dropped 1.6 percent, or 58 cents, to $35.63. They were among the biggest decliners in the S&P 500.
Shares of JPMorgan Chase & Co. (JPM.N) ranked as the second-biggest decliner in the Dow, falling 1.2 percent, or 61 cents, to $51.03 on the NYSE. Continued...
