|
 A sizable 0.50 percentage point rate reduction from the Federal Reserve on Wednesday was not enough to keep stocks higher. An initial relief rally after the Fed announcement gave way to a new selling wave as speculation mounted that insurers that guarantee massive amounts of municipal and corporate debt may receive downgrades from credit agencies as early as this week.
If such downgrades are issued, it will set off a new round of uncertainty in a financial system already badly strained by the subprime mortgage crisis. This new threat appears at a time when some economists believe the economy has entered a recession and when many recent earnings reports have been disappointing.
In addition, Standard & Poor's downgraded -- or threatened to downgrade
-- more than 8,000 mortgage investments. The ratings agency also forecast a widening array of financial institutions would ultimately face mortgage-securities losses totaling more than $265 billion.
This clutch of worries makes it harder to get stocks to rally, although investors are pleased by the latest rate cut and believe many stocks are now attractively priced thanks to recent selloffs.
The futures contract for the Dow Jones industrial average fell 43 points, or 0.3 percent, to 12,351. The Standard & Poor's 500 futures contract lost 3.60 points, or 0.2 percent, to 1,347 as Nasdaq 100 futures declined 8 points, or 0.4 percent, to 1,803.5.
[to top of second column]
 |
 MBIA announced a $2.3 billion overall fourth-quarter loss, after being forced to write-down heavy sums on the subprime mortgage assets it guarantees.
New data reports are on the way. At 8:30 a.m. Eastern time, the Labor Department will release figures on weekly unemployment benefit claims; they're expected to show a 14,000 increase to 315,000, according to Thomson/IFR.
The personal consumption and income report for last month is expected to show a 0.4 percent increase in income, the same gain see in November. A key gauge of inflation known as the personal consumption expenditure index is expected to show a modest 0.1 percent rise, according to Thomson/IFR. That would be down quite a bit from the 1.1 percent advance seen in November.
The Chicago purchasing managers Index for January is due at 9:45 a.m. Eastern. Thomson/IFR forecasts a 53.0 reading, which would be down from 56.4 in December. Still a reading over 50 would show that manufacturing increased in the Midwest this month.
In overseas trade, Japan's Nikkei closed up 1.85 percent, In Europe, London's FTSE 100 fell 0.74 percent, Frankfurt's DAX lost 1.23 percent and Paris' CAC 40 lost 0.96 percent.
[Associated Press; By LESLIE WINES]
Copyright 2007 The Associated Press. All rights reserved. This
material may not be published, broadcast, rewritten or
redistributed. |
