Wall Street slid yesterday as downbeat news from JPMorgan Chase & Co and other financial companies lifted the market's anxiety about the continuing impact of the credit crisis on the economy. The Dow Jones industrials fell nearly 140 points.
The latest reminder of continuing troubles for banks and brokerages came when JPMorgan said late Monday it has incurred wider losses in its mortgage holdings so far in the third quarter than in the second quarter. The second-largest US bank by assets said in a regulatory filing it lost US$1.5 billion, after hedges, in its mortgage-backed securities and loans this quarter, compared to US$1.1 billion in the second three months of 2008.
The losses were proof to investors that the financial sector's problems appear to be nowhere near a resolution.
Meanwhile, Goldman Sachs Group Inc fell after several analysts lowered their ratings and earnings estimates for the investment bank. And UBS AG, Switzerland's largest bank, reported further losses and write-downs of US$5.1 billion during the second quarter.
The market's losses were mitigated for part of the session by a drop in the price of oil, an illustration of the ongoing push-and-pull in the market between oil prices and any news about financials.
Oil trading was buffeted by several factors: differing views on whether global demand is falling or rising, and word from BP PLC that it had shut down an oil pipeline that runs through Georgia as a precautionary measure due to the fighting between Georgian and Russian troops. Light, sweet crude settled down US$1.44 at US$113.01 a barrel on the New York Mercantile Exchange.
The price of crude has fallen more than US$30 from its July 11 high of US$147.27, easing concerns on Wall Street about inflation, but yesterday, the anxiety over the financial sector overwhelmed any relief about oil prices.
"Some of the big bellwether financial-services companies are precipitating the correction that we're seeing," said Phil Orlando, chief equity market strategist at Federated Investors of yesterday's retreat by stocks. Still, he said the run-up in stocks since oil began falling last month has made occasional retrenchments not unexpected.
