HOUSING STOCK
Wall Street’s fear of the housing collapse triggered a fierce stock rout yesterday that spilled into the world’s major capitals yesterday.
The Dow Jones industrial average plunged 226.47 to 13,716.95 – a loss of 1.62 percent that wiped out record-breaking gains and triggered a temporary shutdown designed to cool off Big Board trading – following dire predictions from the head of mortgage industry leader Countrywide Financial that the fall in home prices is the worst since the Great Depression.
Also weighing on the market were disappointing earnings from several companies plus comments from Bill Gross, chief investment officer of Pacific Investment Management Co., that the days of cheap financing fueling the leveraged buyout boom are coming to an end.
In addition to the Dow, the Standard & Poor’s 500 index sank 30.53 points, or 1.98 percent, to close at 1,511.04. The Nasdaq lost 1.89 percent, or 50.72, to hit 2,639.86.
Shares tumbled across every major market in Europe and South America, with Asian markets also expected to open today with jitters.
The dollar also took a pounding, sliding to a new 15-year low against major currencies, while investors fled to the safety of U.S. Treasuries.
If problems stemming from the subprime market spread to other sectors, foreign demand for U.S. corporate debt – a major source of financing for the trade deficit – could waver and further hurt the dollar, some analysts say.
Investors are awaiting new numbers today on U.S. existing home sales, and tomorrow’s report on new home sales.
Both precede the first reading of second quarter U.S. gross domestic product, due Friday, which will indicate to what extent the economy bounced back from the January-March period, its most sluggish quarter of economic growth in more than four years.