US stocks fall as financials slump, oil spikes

Source: Agencies  |   2008-6-19  |     ONLINE EDITION

STOCKS tumbled yesterday amid renewed concerns about the financial sector. The Dow Jones industrial average fell below the 12,000 mark for the first time since mid-March and, along with the other major indexes, showed a decline of more than 1 percent.

Bond prices jumped as stocks retreated.

Unease about financials arose after several worrisome developments.

MF Global Ltd. predicted that tight credit spreads will weigh on its fiscal first-quarter earnings. The futures and options broker said it plans to sell US$300 million in convertible securities to help pay down a loan due this year.

And Morgan Stanley reported stronger-than-expected fiscal second-quarter earnings because of increased trading and asset sales. But earnings at the nation's second-largest investment bank fell 61 percent from a year earlier as revenue declined sharply.

Investors' jitters about the financial sector followed a forecast from major cargo carrier FedEx Corp that predicted earnings for the fiscal year that began this month will fall well short of what Wall Street had been expecting. The company's predictions serve as the latest sign that the spike in oil prices, which have nearly doubled in the past year, is exacting a burdensome tax on businesses and consumers alike.

"I think the news out of FedEx today really is starting to make people second guess some of the optimism that had been brewing over the last few weeks," said Craig Peckham, market strategist at Jefferies & Co. in New York. He said some investors had until recently been hopeful that the market's worries were overblown and that the economy was on the mend.

But sellers dominated in late afternoon trading. The Dow fell 128.31, or 1.06 percent, to 12,031.99. The decline follows a loss of more than 100 points for the blue chips on Tuesday.

It briefly fellow below 12,000 before recovering. The index hadn't traded below the 12,000 level since March 18 and last closed below it on March 17.