U.S. stocks plummeted, while bond prices jumped on 13 March 2007 as mounting delinquencies in the subprime mortgage sector caused investors to sell riskier assets and seek the safety of government debt.
The Mortgage Bankers Association reported the proportion of mortgages in the initial stages of foreclosure rose to the highest rate on record.
The dollar declined, partly in response to the sell-off in U.S. stocks. Late in the day, the dollar was down 1.21% against the yen as investors further unwound trades funded by borrowing at low interest rates in Japan’s currency.
Even oil and gold futures prices fell on worries that mortgage foreclosures could hurt the U.S. economy.
The Dow Jones industrial average fell 242.66 points, or 1.97% , to end at 12,075.96. The Standard & Poor’s 500 Index dropped 28.65 points, or 2.04 percent, to 1,377.95 and the Nasdaq Composite Index slid 51.72 points, or 2.15 percent, to 2,350.57.
The biggest percentage loser on the Nasdaq was Accredited Home Lenders Holding Co., down 65.2% at $3.97, after hitting a lifetime low at $3.77.
Subprime lender New Century Financial Corp. fell 49% to about 85 cents on the Pink Sheets after the New York Stock Exchange delisted the stock.
Selling also extended to the shares of investment banks and traditional lenders.
Aside from the subprime woes, U.S. data released on 13 March 2007 showed February retail sales edged up 0.1% , less than the increase expected by economists. Excluding the auto sector, though, retail sales unexpectedly slipped.
A Rush to buy Yen
Late in New York, the dollar fell to 116.23 yen, down 1.21% from 117.65 yen a day before. The yen also gained against other currencies.
“When you see weakness in the U.S. equities market, you would tend to see investors taking off their risk by buying the yen,” said Ken Landon, global currency strategist at JP Morgan Chase in New York.
European shares also dropped as banks were rattled by concerns about their exposure to the U.S. housing market.
The pan-European FTSEurofirst 300 index fell 1.09% , or 16.09 points, to close at 1,465.92.
Mortgage fallout hits oil and gold
The falling U.S. stock markets undermined sentiment in the energy and precious metals markets, traders said.
Crude oil for April delivery fell 98 cents, or 1.7% , to settle at $57.93 per barrel on the New York Mercantile Exchange. Escalating concerns about losses in the subprime mortgage market led to fears about a slowdown in economic growth, which could curb demand for energy. In four days, the contract has fallen $3.89, or 6.3% .
Gold for April delivery on the COMEX division of the New York Mercantile Exchange declined 90 cents to settle at $649.40 an ounce.
But after the close, the most-active COMEX April gold contract slid $6.40, or nearly 1%, to $643.90 an ounce as the stock market’s sell-off picked up speed.