Retail sales figures add to concern that hands North American markets triple-digit declines
Malcolm Morrison
Sun
Fresh worries about the U.S. housing market handed North American stock markets triple-digit index losses Tuesday, wiping out last week’s recovery from declines sparked by a tumble on China’s stock market.
Tuesday’s concerns centred around subprime mortgage lenders, which make loans to people with poor credit ratings, and fears that their troubles could spread through the economy.
Toronto’s S&P/TSX composite index broke a five-session winning streak, tumbling 255.55 points to 12,809.60.
New York’s Dow Jones industrial average fell 242.66 points to 12,075.96.
Adding to the subprime worries was a U.S. retail sales report that fell short of expectations.
“A lot of the weakness we saw in the retail sales was in housing-related goods and services,” said Patricia Croft, chief economist at Phillips, Hager and North.
“So if we do get into a situation where we see problems not only in subprime, but outside of that area, if credit conditions tighten on a broader basis, then that could spell even further weakness for consumer spending.”
Toronto losses were spread across all sectors, led by the financial, mining and industrial stocks and more than cancelling out last week’s 194-point gain.
The U.S. Commerce Department reported that retail sales last month inched up 0.1 per cent, much below the 0.3 per-cent rise economists were expecting. Excluding auto sales, retail sales slipped 0.1 per cent.
The Nasdaq composite index fell 51.72 points to 2,350.57 while the S&P 500 index lost 28.65 points to 1,377.95.
Investors fled the already weakened stocks of U.S. subprime lenders as the sector’s troubles spread. The New York Stock Exchange said shortly before the opening bell it would immediately suspend trading in shares of New Century Financial Corp. and move to delist the stock.
New Century disclosed that the Securities and Exchange Commission and the U.S. Attorney’s Office launched probes two weeks ago into its accounting.
Meanwhile, Accredited Home Lenders Holding Co. said it is grappling with a liquidity shortfall, confirming concerns that the sector’s troubles are widespread. Its shares plunged 65 per cent.
Giving stocks an extra kick lower was a report from General Motors Acceptance Corp. that struggles in its residential unit are eating into earnings.
And the Mortgage Bankers Association said late mortgage payments shot up to a 31/2-year high in the final quarter of last year and foreclosures hit a record high.
Bombardier Inc. (TSX:BBD.B) fell 23 cents to $4.47 after All Nippon Airways grounded its entire fleet of planes made by the Montreal-based company after the front landing gear on a Dash-8 turboprop failed, forcing the aircraft to make an emergency landing with 60 people on board.
© The Vancouver Sun 2007