US stocks fell yesterday after trading higher for most of the session as oil futures edged up close to $70, and on worries that there may be more fallout from problems in the subprime mortgage market.
Shares of Bear Stearns, which is running damage control following the bail-out of one of its two hedge funds that invested in risky subprime mortgages, tumbled more than 5 per cent after a Merrill Lynch analyst said Bear may have not seen the last of such troubles.
"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 33.90 points, or 0.25 per cent, at 13,326.36.
The Standard & Poor's 500 Index was down 7.75 points, or 0.52 per cent, at 1,494.81.
The Nasdaq Composite Index was down 17.71 points, or 0.68 per cent, at 2,571.25.
Shares of Goldman Sachs were down 2.3 per cent to $217.25. Goldman Sach's subprime mortgage bonds issued last year are being downgraded by rating companies at the fastest rate of any issuer, according to a Citigroup research note dated June 22nd.
Merrill Lynch's subprime brokerage bonds had the second highest number of downgrades.
Merrill Lynch stock was down 1 per cent to $83.63.
Morgan Stanley shares were down 0.9 per cent to $83.86.
Bear Stearns stock was down 4 per cent to $137.99.
Further weighing down equity markets, crude oil futures settled up 4 cents at $69.18 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 $70 a barrel," Mr James said.
"I think there will be heightened inflationary concerns if oil goes above that price."
Shares of Blackstone Group fell in their second day of trading as doubts set in about the valuation of the private equity firm.
Blackstone shares were down 7.6 per cent to $32.40 on the NYSE.
- (Reuters)
