Subprime mortgage worries drive Wall St indexes lower

By REUTERS

NEW YORK: US stocks closed lower on June 25 as growing concerns about the subprime mortgage market dragged down shares of Bear Stearns Cos and Goldman Sachs Group.

Shares of Bear Stearns Cos, which last week bailed out a hedge fund it manages that is heavily invested in subprime mortgages, dropped more than 3% after a Merrill Lynch & Co analyst said the brokerage may need to stump up more cash to rescue a second fund.

Shares of Goldman Sachs Group Inc fell 2.5% after Citigroup Inc said Goldman’s subprime mortgage bonds issued last year are being downgraded at the fastest rate of any issuer.

“There are still a lot of potential concerns with fallouts from the subprime mortgage market,” said Michael James, senior equity trader at Wedbush Morgan Securities in Los Angeles. “Broker stocks, with the exception of Morgan Stanley, have been pretty weak all day.”

The Dow Jones industrial average was down 8.21 points, or 0.06%, at 13,352.05. The Standard & Poor’s 500 Index was down 4.82 points, or 0.32%, at 1,497.74. The Nasdaq Composite Index was down 11.88 points, or 0.46%, at 2,577.08.

Earlier in the session a drop in oil prices helped stocks as it eased inflation concerns, but crude futures ended little changed, erasing the benefit to stocks.

August crude oil futures settled 4 cents higher at US$69.18 (RM238.68) a barrel, after trading more than a dollar lower for most of the day.

“Equity investors were really concerned around the price of oil as it got closer to US$70 a barrel,” James said. “I think there will be heightened inflationary concerns if oil goes above that price.

Shares of Goldman were down US$5.66 to US$216.74. Stock of Bear Stearns, which on June 22 said it would provide up to US$3.2 billion in financing for a struggling hedge fund it manages, lost US$4.65, slumping to US$139.10. Morgan Stanley shares were barely changed at US$84.54.

Shares of Blackstone Group LP fell in their second day of trading as doubts set in about the valuation of the private equity firm .

Blackstone shares were down 7.5% to US$32.44 on the NYSE.

Shares of General Motors Corp stemmed losses on the Dow after Goldman Sachs lifted its rating on shares of the automaker to “buy.”

GM stock rose 2.3% to US$36.27, making it the biggest percentage gainer on the blue-chip average.

Trading was active on the NYSE, with about 1.74 billion shares changing hands, below last year’s estimated daily average of 1.84 billion. On Nasdaq, about 2.07 billion shares traded, above last year’s daily average of 2.02 billion.

Declining stocks outnumbered advancing ones by a ratio of about more than 2-to-1 on the NYSE and by just under 2-to-1 on Nasdaq.

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