Stocks Plummet on Subprime Lender Woes

By S-Q @ 5:24 pm MDT

NEW YORK — Stocks plunged Tuesday, driving the Dow Jones industrials down more than 240 points to their second-biggest drop in almost four years, as troubles piled up for subprime lenders.

Investors, bracing for a wilting economy, fled the already deflated subprime mortgage sector on more news that lenders New Century Financial Corp., Accredited Home Lenders Holding Co. and General Motors Acceptance Corp.'s residential unit are facing financial problems. The Mortgage Bankers Association bolstered the belief that the struggles are widespread after it said new foreclosures surged to an all-time high in the last quarter of 2006.

All three major stock indexes were knocked down about 2 percent.

"The market's still jittery, and they're starting to get full-blown concerns over a bleed in the larger subprime mortgage market," said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds.

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Stocks fall as Chinese stocks take a hit

NEW YORK - Wall Street fell sharply in early trading Tuesday, joining a global stock decline on growing concerns about slowing economies in the U.S. and China. Worries that U.S. stocks are about to embark on a major correction fed the drop, which took the Dow Jones industrials down more than 120 points.

A 9 percent slide in Chinese stocks earlier set the tone for the opening of trading. Concerns that China's economy will slow sent many investors selling just a day after they sent Shanghai's benchmark index to a record high close.

A warning from former Federal Reserve Chairman Alan Greenspan Monday that the U.S. economy may be headed for a recession also took a toll. A Commerce Department that orders for durable goods in January dropped by the largest amoung in three months exacerbated concerns about the economy, as did a Standard & Poor's index showing single-family home prices across the nation were flat in December.

In the first hour of trading, the Dow Jones industrial average dropped 123.69, or 0.98 percent, to 12,508.57.

Broader stock indicators also fell sharply. The Standard & Poor's 500 index was down 17.96, or 1.24 percent, to 1,431.41, and the Nasdaq composite index was down 49.13, or 1.96 percent, to 2,455.39.

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