Stocks pulled back sharply Monday as news that major U.S. banks will set up a fund to help bail out the credit markets stirred concerns about bad debt. Bonds fell after an upbeat economic reading.
The stock market's pullback follows concerns about debt but also as investors also await third-quarter reports due this week from more than 80 members of the Standard & Poor's 500 index. In addition, oil pushed to new highs.
Concerns about banking drew investors' attention. Citigroup Inc., the nation's biggest financial institution, reported that third-quarter results fell 57 percent because of investments in mortgage-backed securities. The drop wasn't as severe as the company had warned could occur.
The bank — along with JPMorgan Chase & Co. and Bank of America Corp. — announced the creation of a fund used to help revive the asset-backed commercial paper market. The fund will buy assets from structured investment vehicles, also known as SIVs, which buy corporate bonds and subprime mortgage debt. The bailout was orchestrated by the Treasury Department to avoid a fire sale in the market.
In early afternoon trading, the Dow Jones industrial average fell 161.61, or 1.15 percent, to 13,931.47.
Broader stock indicators also fell. The S&P 500 index fell 17.33, or 1.11 percent, to 1,544.47, and the Nasdaq composite index fell 33.10, or 1.18 percent, to 2,772.58.
October 16 2007
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