Stocks Tumble on New Signs of Economic Woes
Written on January 9, 2008
Stocks tumbled Tuesday afternoon after the chief executive of the nation’s largest phone company, AT&T, suggested a weaker economy was forcing consumers to scale back spending.
The market was up modestly earlier in the day, but was rattled by the warning from AT&T and rumors that Countrywide Financial, the nation’s largest mortgage company, might seek bankruptcy protection. Countryside issued a statement denying the reports.
The Standard & Poor’s 500 stock index fell 1.8 percent, or 25.99 points, to 1,390.18, its lowest close since last March. The Dow Jones industrial average shed 238.42 points, or 1.9 percent, to 12,589.07. The Nasdaq composite closed down 58.95 points, or 2.4 percent, to 2,440.51.
With the exception of Monday, the S.& P. has fallen in all five sessions since the year started. It is down 5.3 percent for the year and 11.2 percent since hitting a new high on Oct. 9, meeting the technical definition of a correction.
Since the year began, investors have grown increasingly fearful that the economy is headed toward a recession and that efforts to revive it through interest rate cuts or federal government policy will not be sufficient.
Investors appeared to react strongly to the statements by AT&T’s chief executive, Randall L. Stephenson, because it suggested the weakness in the economy may start hurting profits of a broader range of companies aside from financial firms, retailers and home builders.
On Friday, the Labor Department reported that the unemployment rate had jumped to 5 percent in December, from 4.7 percent cash advance loan no fax. On Tuesday, the National Association of Realtors said its pending home sales index, which tracks signings of sales contracts, fell 2.6 percent in November after increasing for much of the Fall. Recent data on manufacturing has also indicated slowing economic growth.
Shares of Countrywide fell $2.17, or 28.4 percent, to $5.47 on Tuesday after the company issued a statement that said there was “no substance to the rumor that Countrywide is planning to file for bankruptcy.” The company has been dogged by rising defaults and foreclosures. Some regulators and lawmakers have also been looking into Countrywide’s lending practices.
AT&T shares fell 4.6 percent, or $1.87, to $39.16, their biggest decline in nearly five years. Speaking at an investment conference, Mr. Stephenson said AT&T was seeing “softness” in its broadband and traditional home phone businesses. The company’s mobile phone and corporate units however were continuing to grow, Mr. Stephenson said at a Citigroup event, according to Bloomberg News.
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