Triple digit sell-off continues in Wall Street

Dow closes below 13,000 mark for the first time in four months

Another fresh round of credit worries plagued the US market today, Wednesday, 15 August, 2007, after shares of Countrywide Financial witnessed heavy selling, pushing Financial stocks to the wall. The Federal Reserve once again tried to comfort the situation by another fresh round of $7-billion liquidity injection through repurchase agreement. But stocks stumbled in the final hour of trading to end with a triple-digit sell-off.

The Dow Jones Industrial Average, after being up by almost 90 points earlier in the day, dropped by a huge 167 points while going into close to end the day at 12,861.47. Tech-heavy Nasdaq shed 40.29 points to settle at 2,458. S&P 500 lost 19.84 points to end at 1406.7.

All but one of the 30 Dow stocks closed in the red today. General Motors, Honeywell and Alcoa led the team of Dow laggards for the day. Johnson & Johnson was the only Dow winner.

With today’s decline, Dow has lost almost 800 points (6%) in the last five days. Nasdaq, too, has shed almost 160 points (5.4%). A tame inflation data and a healthy manufacturing index, too, failed to curb any loss that the market witnessed today.

The stock of Countrywide Financial, the nation's biggest mortgage lender, was down as much as 20% today after Merrill Lynch downgraded the stock from "buy" to "sell." The stock closed lower by 13%. The stock also got hammered after it was reported that dealers were currently quoting the company’s commercial paper at 12.5%.

KKR Financial Holding announces sale of residential mortgage loans

When the market opened in the morning, all the three indices opened in red. Another round of negative developments in the credit market exacerbated credit concerns among investors whose sentiments had been hard hit since the past few days from mortgage problems.

To make situation worse, KKR Financial Holding announced the sale of $5.1 billion of residential mortgage loans, saying it will no longer invest in such assets and may need to record a charge of up to $200 million. Its stock fell 31%.

The Consumer Price Index report showed that consumer prices rose 0.1% in July 2007. The number was in line with economists' expectations and down slightly from the 0.2% rise in June 2007. The core number, which excludes volatile food and energy prices, rose 0.2% last month, also in line.

Also, at the top of the hour, The National Association of Home Builders/Wells Fargo index of builder confidence fell to 22, from 24 in July 2007. That was also the second weakest reading since the survey's inception in 1985.

HDFC Bank and ICICI Bank slip by 4% to 6%

Among Indian ADRs, banking stocks were hard hit. HDFC Bank closed 4% lower too $79.56. ICICI Bank registered a greater loss and was down by 6.1% at $39.4. Technology stocks were not far behind. Infosys Technologies shed 3%. VSNL was the top loser, down 5.4% to close at $18.87.

On the New York Stock Exchange, volume hit nearly 2 billion shares, while declining issues outpaced advancers 3 to 1. On Nasdaq, 2 billion shares were traded, with decliners ahead of advancers more than 2 to 1.

H-P to declare its earnings report tomorrow

Crude oil futures finished higher today after traders became concerned about a couple of tropical storms that are expected to hit some oil sensitive regions. The Energy Department’s crude inventory report also added to the firming up of the crude price. Oil rose after the government report showed a bigger-than-expected drop in U.S. inventories last week.

Crude-oil futures for light sweet crude for September delivery closed at $73.33/barrel (higher by $0.95/barrel or 1.31%) on the New York Mercantile Exchange. Yesterday, too, crude had closed higher by 76 cents at $72.38/barrel.

Dow component H-P will be tomorrow morning's headliner as it comes out with its earnings report. Other than this, the market will focus on Housing Starts (the number of privately owned new homes on which construction has been started over some period) and Jobless Claims (how many people have filed for unemployment benefits in the previous week). Later in the day will be the Philadelphia Fed Survey, which focuses on the manufacturing sector and provides insight into commodity prices.