Wall St indexes sell off on housing, credit fears

NEW YORK (Reuters) - Stocks plummeted on Thursday, with the Dow industrials tumbling more than 300 points, on signs of further weakness in the housing market and deteriorating conditions for corporate buyouts.

The S&P shed about $300 billion in market value in the worst single session since the February 27 global market sell-off, with surprisingly weak earnings reports also weighing on stocks. Even with the sharp decline, the Dow and S&P 500 are within 5 percent of their respective record highs.

A drop in quarterly profit at Exxon Mobil Corp., helped wipe out more than $16 billion in market value of the world's largest publicly traded company.

The daily drumbeat of bad news on housing on Thursday came from two of the largest home builders, as D.R. Horton Inc and Beazer Homes posted quarterly losses.

Financial shares took a beating on growing evidence that problems in the subprime mortgage market are spreading, making financing the corporate buyouts that drove the market's spring rally more difficult.

"It was easy credit that helped fuel stock prices," said Peter Boockvar, equity strategist at Miller Tabak & Co. in New York. Worsening credit conditions means "less liquidity for private equity, stock buybacks, business expansion, consumer spending, global growth."

The Dow Jones industrial average dropped 311.50 points, or 2.26 percent, to close at 13,473.57. The Standard & Poor's 500 Index was down 35.43 points, or 2.33 percent, at 1,482.66. The Nasdaq Composite Index was down 48.83 points, or 1.84 percent, at 2,599.34.

Like the S&P, the Dow suffered its worst one-day percentage loss since February 27. In late morning, the NYSE imposed trading curbs as losses mounted to restrict large-block sales when a stock is falling. The Dow had tumbled more than 400 points by the afternoon.

On the floor of the New York Stock Exchange, traders said their computer screens were a sea of red all day from the heavy sell orders. But some noted that the sell-off still did not come close to the plunge suffered on "Black Monday" in October 1987.

"1987 was without question the most emotional day that I had ever seen. This is nothing compared to '87, this is a blip," said Theodore Weisberg, a broker at Seaport Securities who has spent 38 years on the NYSE floor.

The slump was worldwide, with overnight equity losses in Asia and the biggest daily drop in five months in Europe. U.S. Treasuries rallied, meanwhile, on a flight to safety.

The Chicago Board of Options Exchange's volatility index, a key gauge for measuring investor anxiety, at one point shot to its highest level in over 13 months.

Volume was well above average on the NYSE, with decliners far outpacing advancing shares by about 10 to 1.

Beazer shares fell 8.7 percent to $15.56 while D.R. Horton was down 1.8 percent at $17.16. The weak results come a day after rivals Ryland Group Inc and Pulte Homes Inc also reported second-quarter losses.

In addition, government data showed a sharper-than-expected drop in June new home sales and home builder WCI Communities Inc. said the real estate market downturn was hurting its push to sell itself. The stock fell 12.8 percent to $9.87 on the

NYSE.

Exxon led decliners on the S&P 500 and Dow industrials, falling 4.9 percent to $88.23.

Financial shares were also among the biggest losers, with JPMorgan Chase & Co off 2.63 percent to $44.08 and Citigroup Inc down 2.85 percent to $47.81.

Chrysler Group's announcement this week of a postponement of a $12 billion loan to finance a private equity takeover helped to fan concern the environment for deal financing may be getting tougher.

Dow Chemical Co. reported a slight increase in quarterly earnings, but its shares slid 4.86 percent to $43.45, as some analysts argued that a lower-than-expected tax rate helped boost earnings more than improved demand.

Manufacturer 3M Co. was the only Dow stock that ended higher. The company posted stronger-than-expected earnings and raised its 2007 profit forecast, pushing the stock up 0.5 percent to $90.05.

About 2.78 billion shares changed hands on the NYSE compared with last year's estimated daily average of 1.84 billion. On Nasdaq, about 3.39 billion shares traded, well above last year's daily average of 2.02 billion.

Declining stocks outnumbered advancing ones by a ratio of about 5 to 1 on Nasdaq.