Stocks plunge more than 200 points

July 9, 2008 1:43:08 PM PDT
Wall Street tumbled Wednesday as investors grappled with renewed worries about the soundness of the financial sector. The major indexes fell more than 2 percent, including the Dow Jones industrial average, which lost more than 230 points.While many financial services companies logged steep declines during the session, government-sponsored lenders Freddie Mac and Fannie Mae were among those hardest hit. Investors are worried that the mortgage finance companies will have to sell more shares than anticipated to compensate for losses from the housing slump. Merrill Lynch & Co. also dropped, after Fitch Ratings put its long-term credit default rating on watch for a possible downgrade.

With dismal bank and lender earnings expected in the coming weeks, investors were unable to keep buying a day after stocks, including financials, had logged sharp gains. Investors are bracing for financial companies to take another series of major credit-related write-downs, but the uncertainty about how large they'll be is weighing on the market, said Scott Wren, senior equity strategist at Wachovia Securities.

"As we go into earnings season, it's going to be much of the same as the first quarter," Wren said. "Financials are going to suffer the worst comparisons again; consumer discretionary earnings are going to be down, too."

Selling accelerated amid light volume, which tends to skew price moves.

Meanwhile, oil remained a concnern. Having dropped by more than $9 a barrel over the last two days, crude fluctuated before settling up a penny at $136.05 a barrel on the New York Mercantile Exchange.

According to preliminary calculations, the Dow fell 236.77, or 2.08 percent, to 11,147.44.

The Standard & Poor's 500 index fell 29.01, or 2.28 percent, to 1,244.69, while the Nasdaq composite index fell 59.55, or 2.60 percent, to 2,234.89.

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