- (Bloomberg) -- The stock market buckled and erased all
of this year's gains for the Standard & Poor's 500 Index on speculation
the nation's biggest mortgage lender may be forced into bankruptcy.
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- Countrywide Financial Corp., the Calabasas, California-based
lender with about 55,000 employees, tumbled 13 percent on the New York
Stock Exchange. Earlier in the day, Merrill Lynch & Co. said Countrywide
could face ``effective insolvency'' should creditors force it to sell assets
at depressed prices. Freeport-McMoRan Copper & Gold Inc. led raw-materials
producers to the biggest decline in the S&P 500 on concern mounting
credit losses may slow economic growth and reduce demand for metals.
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- The S&P 500 dropped for a third day, losing 19.84,
or 1.4 percent, to 1,406.70. The Dow Jones Industrial Average retreated
167.45, or 1.3 percent, to 12,861.47, sending the 30-stock gauge below
13,000 for the first time since April. The Nasdaq Composite Index decreased
40.29, or 1.6 percent, to 2,458.83.
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- ``Feels like we're on the edge of a panic to me,'' said
Jeffrey Saut, who oversees $33.7 billion as chief investment strategist
at Raymond James & Associates in St. Petersburg, Florida. ``In our
business, psychology is everything and psychology has changed real quick
on Wall Street.''
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- Global Retreat
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- European stocks fell a second day and a benchmark index
for Asian shares slipped. Yields on three-month Treasury bills declined
the most since 1989 as investors sought the safety of government debt.
The dollar weakened to a 4 1/2-month low against the yen as investors sold
riskier assets funded by loans in Japan.
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- The S&P 500's 6.1 percent retreat since Aug. 8 was
the biggest five-day loss since Oct. 9, 2002. The Dow's 5.8 percent tumble
over the same period was the largest since Jan. 27, 2003.
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- The benchmark index for U.S. stock volatility, called
the VIX, exceeded 30 for the first time since April 2003.
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- Countrywide Financial dropped for a fifth day, falling
$3.17 to $21.29 for the steepest decline in the S&P 500 and the shares'
biggest retreat since the stock-market crash in October 1987. Merrill Lynch
advised clients to sell the shares and said ``funding markets are deteriorating
quickly.''
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- Amber Cousins, a spokeswoman for Countrywide, didn't
return calls seeking comment.
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- Freeport-McMoRan tumbled $5.48 to $77.87 after the price
of copper dropped to a seven-week low.
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- The miner led a gauge of raw-materials producers to a
3.1 percent retreat, the biggest among 10 industries in the S&P 500.
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- Railroad Rout
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- CSX Corp., the third-largest U.S. railroad, declined
$2.87 to $42.27 after analysts at Citi Investment Research said the shares
do not reflect the risk of a slowing U.S. economy, adding that they expect
coal volumes to be little changed.
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- Norfolk Southern Corp., the fourth-largest U.S. railroad,
retreated 71 cents to $49.37. Burlington Northern Santa Fe Corp., the second
biggest, fell $1.18 to $79.05. Union Pacific Corp., the largest, lost $5.49
to $107.65. Citi had a ``hold'' rating for all four rail stocks.
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- Financial shares dropped 1 percent as a group. For the
year, the S&P 500 Financials Index has lost 13 percent for the biggest
decline among 10 industry groups as losses in credit markets spread throughout
the industry.
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- Goldman, MFA
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- Goldman Sachs Group Inc. fell $4.85 to $164.90. The world's
most profitable securities firm waived fees to draw investors to its Global
Equity Opportunities hedge fund after stock-market losses wiped out $1.4
billion of assets this month, according to a person with direct knowledge
of the terms.
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- MFA Mortgage Investments Inc. declined 39 cents to $6.01
after Bear Stearns & Co. downgraded the real estate-investment trust
that invests in home loans to ``peer perform'' from ``outperform.''
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- Financial shares rallied earlier in the day after Canadian
financial services firm Coventree Inc. said it found buyers for C$600 million
($558 million) of asset-backed commercial paper, indicating a funding freeze
may be lifting.
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- Sales of bonds backed by consumer and home loans fell
87 percent to $1.3 billion last week and no mortgage bonds were sold as
short-term debt rates rose, according to data compiled by Bloomberg.
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- The Chicago Board Options Exchange Volatility Index increased
as much as 15 percent to 31.76. Higher readings in the so-called VIX, derived
from prices paid for S&P 500 options, indicate traders expect bigger
share-price swings in the next 30 days.
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- `Crash Scenario'
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- ``What that indicates is that people are worried not
about this move or the past couple of weeks but the possibility of a real
market sell-off or crash scenario,'' said Ben Londergan, co- CEO of Group
One Trading LP in Chicago. ``We've seen not that large a move to the downside
in percentage terms but we've really had a big move up in the VIX.''
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- More than 5 stocks fell for every one that gained on
the New York Stock Exchange. Some 2 billion shares changed hands on the
Big Board, 15 percent more than the three-month daily average.
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- Technology shares in the S&P 500 fell 1.8 percent,
led by Agilent Technologies Inc. The world's biggest maker of scientific-testing
equipment tumbled $3.94 to $32.39 after forecasting fourth-quarter sales
and profit that fell short of analysts' estimates. The company blamed its
reduced forecast on a slump in Asia and consolidation among the company's
customers.
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- Applied Materials Inc. fell 88 cents to $20.36. The largest
manufacturer of semiconductor-production machines said orders, an indicator
of future sales, retreated 14 percent from the previous quarter, at the
lower end of a forecast given by Chief Executive Officer Mike Splinter
in May.
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- Economy Watch
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- In economic reports, the government said consumer prices
climbed 0.1 percent in July, the smallest gain in eight months, signaling
the Federal Reserve may view inflation as less of a threat. Core prices,
which exclude food and energy, climbed 0.2 percent and were up 2.2 percent
from a year earlier. The figures matched forecasts by economists in a Bloomberg
survey.
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- The National Association of Home Builders/Wells Fargo
index of builder confidence declined to 22, from 24 in July, the Washington-based
association said. A reading below 50 means most respondents view conditions
as poor. The gauge has decreased for six consecutive months.
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- Manufacturing in New York state unexpectedly held near
the highest level in more than a year in August. The Federal Reserve report
showed. The New York Federal Reserve's general economic index fell to 25.1
from 26.5 in July. Economists forecast the index would decline to 18 this
month, according to a survey.
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- In other markets, crude oil for September delivery gained
95 cents to $73.33 a barrel in New York.
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- The Russell 2000 Index, a benchmark for companies with
a median market value of $639 million, lost 1.5 percent to 751.54. The
Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, fell
1.5 percent to 14,146.41.
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- The Morgan Stanley Capital International World Index,
a global benchmark, lost 1.5 percent. The MSCI Asia-Pacific Index declined
to a three-month low, losing 2.5 percent. In Europe, the Dow Jones Stoxx
600 Index lost 0.3 percent.
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- To contact the reporter on this story: Lynn Thomasson
in New York at lthomasson@bloomberg.net .
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