Stocks Steady Amid Mortgage Concerns
Wall Street managed to stabilize itself Monday, though investors remained nervous about mortgage defaults, a strengthening yen and tumbling stock markets abroad, ABC News reports.
The major indexes fluctuated as investors tried to size up where the market was headed and traders swooped in to take advantage of stocks left severely depressed by last week’s big decline.
“Probably it’s better to save any judgment on this market today until the last half hour,” said Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis, noting that little has changed in terms of economic fundamentals, but that the market is still volatile.
Concerns about losses over soured subprime [bad credit mortgage] loans to customers with poor credit ratings were one of the many factors behind Wall Street’s selloff last week.
Those worries were rekindled this morning when HSBC Holdings PLC, Europe’s largest bank, said its 2006 earnings rose 5 percent but that it suffered $10.6 billion on losses on bad home loans from its U.S. subprime lending operations.
The bad credit home loan sector, already dragged down by concerns that too many people are defaulting on mortgages, was kicked down further when New Century Financial Corp., the second-largest subprime lender, said Friday that a federal prosecutor and the New York Stock Exchange are conducting investigations into movements in the company’s stock price.
New Century fell $8.80, or 60 percent, to $5.85.
Investors were also watching for clues to the economy’s health in speeches Monday by Federal Reserve officials. St. Louis Fed President William Poole, a member of the interest rate-setting (and home loan rate influencing) Federal Open Market Committee, echoed recent statements by Fed Chairman Ben Bernanke Monday.
Pool stated that the outlook for the economy is not as bad as the market’s recent downturn suggests, but that many question marks remain - many of them pertaining to the volatile home mortgage business.
SOURCE: ABC News