Market falls on credit, economic concerns

U.S. stocks fell on Wednesday, with the benchmark S&P 500 index briefly dipping into negative territory for the year, on persistent fears that fallout from the credit crisis and the housing slump will hurt economic growth.

Financial services companies, including Goldman Sachs Group Inc. (GS.N), led the sell-off, while bellwether General Electric (GE.N) dropped on concerns about the economy.

U.S. Treasury Secretary Henry Paulson said the number of potential U.S. home-loan defaults will be significantly bigger in 2008 than in 2007. His comments in an interview with The Wall Street Journal helped set the market's negative tone.

Shares of mortgage lenders, including Countrywide Financial Corp (CFC.N), also tumbled. American International Group Inc (AIG.N), the world's biggest insurer by market value, was the top drag on both the Dow and the S&P 500, dropping as much as 6 percent.

"We just can't seem to break free of the financial concerns that are out there. The unwinding of the real estate and the mortgage market continues to weigh on investor concerns," said Bucky Hellwig, senior vice president at Morgan Asset Management, in Birmingham, Alabama. "There is also more of a focus now on balance sheets of financials rather than their earnings -and that's never a good sign."

The Dow Jones industrial average (.DJI) was down 66.08 points, or 0.51 percent, at 12,944.06. The Standard & Poor's 500 Index (.SPX) was down 6.58 points, or 0.46 percent, at 1,433.04. The Nasdaq Composite Index (.IXIC) was down 5.24 points, or 0.20 percent, at 2,591.57.

For the year the S&P 500 was up 1 percent, after earlier dipping into the red.

The prospect of $100 oil hurt the shares of big manufacturers and retailers on concern about the impact of higher fuel costs on businesses and consumers. Earlier, a survey showed U.S. consumer sentiment fell in November to its lowest in two years.

U.S. crude for January delivery hit a record $99.29 earlier on Wednesday before retreating on the New York Mercantile Exchange. NYMEX January crude fell 73 cents, or 0.7 percent, to $97.30 a barrel.

Risk aversion drove investors to seek a safe haven in U.S. government bonds. By 2 p.m. (1900 GMT) when the market closed early ahead of the Thanksgiving holiday, the yield of the benchmark 10-year Treasury note was 4.01 percent. Earlier it had dipped below 4 percent for the first time since September 2005.

Shares of Goldman Sachs dropped 2.1 percent to $212.99 on the New York Stock Exchange, while AIG fell 4.5 percent to $52.00. On Tuesday, an AIG shareholder sued several of the company's officials over the insurer's exposure to the subprime mortgage crisis.

Shares of Countrywide, the biggest U.S. mortgage lender, declined 8.3 percent to $9.43 on the New York Stock Exchange.

Among big manufacturers, General Electric (GE.N) fell 2.6 percent to $37.06, while among retailers, home improvement chain Home Depot Inc (HD.N) declined 1.1 percent to $28.18.

But stocks were off the day's worst levels, due in part to a turnaround in the shares of General Motors. GM shares reversed course after finance company GMAC said it was exploring the sale of parts of its troubled mortgage-lending arm, Residential Capital LLC (ResCap). GM owns 49 percent of GMAC.

GM slid nearly 7 percent in early morning trading, before rebounding in late afternoon trading, when it was up 3.3 percent at $27.16.
(Source REUTERS)