US stocks decline as worries about financials persist

Source: Agencies  |   2008-7-15  |     ONLINE EDITION

WALL Street extended its slump into yet another week yesterday as investors worried that even a safety net set up for mortgage financiers Fannie Mae and Freddie Mac won't head off further troubles in the financial markets.

Investors' latest unease about the banking sector comes in a week when many financial names are to issue quarterly reports, many of which will likely include sizable write-downs of souring mortgage debt.

The Treasury and the Federal Reserve said Sunday they would aid Fannie Mae and Freddie Mac if needed. Wall Street has been on edge about the well-being of the government-chartered companies because they together hold or back US$5.3 trillion of mortgage debt, about half the outstanding mortgages in the United States. Washington's efforts to shore up confidence in Fannie Mae and Freddie Mac at times helped those shares yesterday but troubles arose in other corners of the financial sector.

Investors worried about a run on IndyMac Bancorp Inc. that led to the bank's takeover by the government Friday. IndyMac is the largest regulated thrift to fail.

Trading in shares of regional bank National City Corp was briefly halted as the company responded to rumors of financial troubles. The bank said in a statement it is experiencing "no unusual depositor or creditor activity" and that as of Friday's close it had more than US$12 billion of excess short-term liquidity.

The rumors and sell-off of regional banks reflect the unease investors have about where financial troubles might emerge.

"My sense is that investors are taking a pretty cautious stance," said Jack A. Ablin, chief investment officer at Harris Private Bank in Chicago. "The government can't bail out the whole industry."

The Dow Jones industrial average fell 45.35, or 0.41 percent, to 11,055.19 after spiking nearly 140 points in early trading.