Housing worries clobber stocks

Stocks plunged today amid deepening worries about the health of the housing markets and disappointing earnings reports.

But a great earnings report from Amazon.com (AMZN, news, msgs) that sent shares soaring more than 20% in after-hours trading may ease the fears when the market opens in the morning.

Today, however, fear ruled as the major indexes had their worst days since March.

The Dow Jones industrials fell about 226 points, 1.6%, to just under 13,717, their second loss of more than 140 points in three trading sessions and their worst one-day point loss since March 13, when it tumbled 242 points. Twenty-nine of the 30 stocks in the blue-chip index were lower on the day. Verizon Communications (VZ, news, msgs) was the only Dow winner, up 0.8% today to $43.11.

The Standard & Poor's 500 Index slumped nearly 31 points to 1,511. Only 30 of the 500 stocks in the index were higher on the day. It was the worst one-day point loss for the widely watched index since Feb. 27, when the stock market tumbled in the wake of a sell-off started with the Shanghai stock market.

The Nasdaq Composite Index dropped nearly 51 points to 2,640, thanks in part to a 6.1% decline to $134.89 for Apple (AAPL, news, msgs) after an earnings report from AT&T (T, news, msgs) suggested early sales of Apple's iPhone weren't as robust as thought. AT&T has an exclusive deal to sell the iPhone. Apple reports third-quarter earnings after tomorrow's close.

Financial and housing stocks generated the greatest concern for traders and investors. Countrywide Financial (CFC, news, msgs), one of the nation's largest mortgage lenders, said even its better customers are having problems making their monthly mortgage payments. CEO Angelo Mozilo added to the gloom when he said he didn't see the real estate market nationally recovering before 2009, a sentiment that echoes comments from some home builders.

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Countrywide's comments came as it reported quarterly profit dropped 33% from a year ago. The mortgage company reduced its profit outlook for the full year to between $2.70 and $3.30 a share, sharply down from a few months ago, when it forecast $3.50 to $4.30 a share.

The stock was down 10.5% to $30.50 -- the worst percentage loss among S&P 500 stocks. And that was just the start of a general drubbing of financial stocks.

American Express (AXP, news, msgs) was down 5.4% to $61.17 as it reported more late payments from credit card issuers. American Express accounted for 28 points of the Dow's loss.

Citigroup (C, news, msgs) was down 3.1% to $49.31, and JPMorgan Chase (JPM, news, msgs) slumped 3.8% to $45.34. Lehman Bros. (LEH, news, msgs) was off 3.7% to $66.34. Goldman Sachs (GS, news, msgs) fell 3.4% to $198.15, and Bear Stearns (BSC, news, msgs) fell 3.2% to $129.85. Goldman Sachs hadn't been under $200 since March 16.

The Standard & Poor's Banking Index ($BIX.X) was off 2.9% to 366.25. The Amex Securities Broker/Dealer Index ($XBD.X) was off 3.7% to just under 240, and the Philadelphia Housing Sector Index ($HGX.X) was down 3.6% to 197.60.

The housing index is off 16% for the year, but, for all the volatility that's hit financial stocks this year, the broker/dealer index is down less than 1% on the year. The index is down 4.7% so far this month.

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Amazon.com offers some hope

For a market starved for good news today, Amazon.com's earnings offered a lot of cheer after the close, and its shares were jumping in after-hours trading.

The Internet merchant reported earnings of $78 million, or 19 cents a share. That was above Wall Street's consensus estimate of 16 cents and up more than 250% from a year ago's net of $22 million, or 5 cents a share.

Revenue of $2.89 billion beat Wall Street estimates of $2.81 billion and was up 35% from a year ago's $2.14 billion. The company raised its third-quarter revenue forecast to $3 billion to $3.175 billion. Wall Street had estimated $3.01 billion.

Amazon.com's gross margin using generally accepted accounting rules was 4%. Wall Street had expected 3.3% to 3.6%, CNBC's Jim Goldman said. Analysts watch the gross margin as a key measure of profitability.

The stock was at $79.23 in after-hours trading, up $8.74 billion from a regular close of $69.25. The stock had fallen 3.5% in regular trading.

The other guilty parties in the market

Another pair of culprits also weighed on the markets:

• DuPont (DD, news, msgs), whose shares fell 6.3% to $49.90 and contributed nearly 27 points to the Dow's loss. Results from products used in home construction and automobiles disappointed investors. Raw materials costs and higher energy prices were a problem too.

• Texas Instruments (TXN, news, msgs), down 4.5% to $36.46. The company last night offered weaker-than-expected guidance for its current quarter.

Falling energy prices also contributed by pushing energy stocks lower. Crude oil fell to $73.56 a barrel in New York, down 1.6% from Monday, and natural gas fell 2.9% to $5.86 per million British thermal units. Natural gas had not been under $6 since October.

An emerging credit crunch

A subtle but important threat to the market has started to emerge. A sale of bonds to pay for the purchase of General Motors' (GM, news, msgs) Allison Transmission unit was postponed last night as investors demanded more interest from the buyers than originally expected.

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This came on top of Expedia's (EXPE, news, msgs) announcement Monday that it's cutting the size of a stock buyback from 117 million shares to 25 million, a buyback it was going to finance by selling debt. Expedia blamed the credit markets.

GM fell 1.3% today to $34.65. Expedia fell 3.6% to $25.75 on top of a 9.1% loss on Monday.

The ability of buyers to borrow huge amounts of money at low rates has been a major driver of the stock market. If the numbers don't work for buyers, there may not be as many private-equity deals, and the market could see more downside.

Energy prices -- New York close

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$73.56	$74.89	-$1.33	4.07%	20.49%
Heating oil (per gallon)	$2.0309	$2.0561	-$0.0252	-0.05%	27.10%
Natural gas (per million BTU)	$5.8630	$6.0390	-$0.1760	-13.44%	-6.92%
Unleaded gasoline (per gallon)	$2.0477	$2.1041	-$0.0564	-10.74%	27.81%

Antidepressant sales boost Lilly

Shares of drug giant Eli Lilly (LLY, news, msgs) mostly withstood the selling, finishing the day unchanged at $57.17, after reporting better-than-expected second-quarter results. The company said that net income fell to $663.6 million, or 61 cents per share, from $822 million, or 76 cents per share, a year ago. Excluding an acquisition charge, however, Lilly earned 90 cents per share, above the consensus estimate of 82 cents per share.

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The drug company said sales jumped 20% to $4.63 billion. Sales of its antidepressant drug Cymbalta soared 67% to $519.5 million, while sales of its top-selling anti-psychotic medication, Zyprexa, rose only 9% to $1.21 billion.

Housing and autos hit DuPont

DuPont shares crumbled after the chemical giant said it earned $972 million, or $1.04 per share, in the second quarter, a slight decline from the $975 million, or $1.04 per share, the company earned last year.

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The results were 2 cents short of Wall Street's estimate.

DuPont is a big producer of car paint. It also makes countertop material Corian and Tyvek weather wrap, both used by builders, as well as Kevlar, the bulletproof material used by police and the military.

Not paying their Amex bills

After the bell Monday, American Express reported a 12% rise in profit for the second quarter. The company earned $1.06 billion, or 88 cents per share, up from $945 million, or 76 cents per share, in the same quarter a year ago.

While the company's earnings were 2 cents better than analysts expected -- and cardholders spent 15% more in the quarter from the same quarter last year -- the company boosted its provisions for losses in its U.S. cards division by 85% to protect against losses from delinquencies.

PepsiCo (PEP, news, msgs) earned $1.56 billion, or 94 cents per share, in the second quarter -- up from $1.38 billion, or 81 cents per share, a year ago.

Analysts had expected 89 cents per share. The stock was down 0.5% to $66.26.

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The beverage and snack maker said revenue rose to $9.6 billion from $8.7 billion last year.

Despite the iPhone, AT&T had a good quarter

Despite the questions about the iPhone sales, AT&T said net income jumped 61% to $2.9 billion, or 47 cents per share, from $1.81 billion, or 46 cents per share, in the second quarter of 2006. The stock couldn't avoid today's sell-off and finished down 0.9% to $39.68.

AT&T benefited from the purchase of BellSouth last year, which gave Ma Bell full control of the unit formerly called Cingular Wireless.

Excluding extraordinary items, like acquisition costs, AT&T earned 70 cents per share, 3 cents ahead of analysts' estimates.

A lousy quarter for TI

The second quarter wasn't a good one for chip maker Texas Instruments.

The company, one of the biggest makers of chips used in cell phones, late yesterday reported net income of $610 million, or 42 cents per share -- down 74% from $2.39 billion, or $1.50 per share in the same quarter last year. Analysts had expected earnings of 42 cents per share.

Revenue also fell, down more than 7% to $3.42 billion. Texas Instruments said the decline was partly due to the sale of its sensor business after the second quarter of 2006.

TI said it expects profit of 46 to 52 cents per share for the third quarter; Wall Street's forecast is for 49 cents.

Short hits from the markets -- 4 p.m. ET

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	4.875%	4.855%	0.020	4.39%	-0.20%
5-year Treasury note yield	4.826%	4.858%	-0.032	-2.23%	2.66%
10-year Treasury note yield	4.944%	4.964%	-0.020	-1.77%	4.97%
30-year Treasury bond yield	5.062%	5.067%	-0.005	-1.25%	5.06%
Currencies
U.S. Dollar Index	79.93	80.22	-0.29	-2.15%	-4.20%
British pound in dollars	$2.0627	$2.0602	0.0025	2.56%	5.26%
Dollar in British pounds	£0.4848	£0.4854	-0.0006	-2.49%	-5.00%
Euro in dollars	1.3833	1.3820	0.0013	2.06%	4.80%
Dollar in euros	€ 0.7229	€ 0.7236	-0.0007	-2.02%	-4.58%
Dollar in yen	¥120.15	¥121.02	-0.87	-2.25%	0.95%
Commodities
Gold	$684.80	$681.50	$3.30	5.21%	7.34%
Copper	$3.6195	$3.6565	-$0.037	4.90%	26.07%
Silver	$13.4430	$13.3300	$0.11	7.78%	3.93%
Crude oil (NYMEX) (per barrel)	$73.56	$74.89	-$1.33	4.07%	20.49%

Midwest Air investor urges talks with AirTran

Midwest Air Group's (MEH, news, msgs) biggest shareholder had some harsh words for the company late yesterday.

Hedge fund Octavian Management, which owns a 7.5% stake in the airline, urged the company's management to engage immediately with AirTran Holdings (AAI, news, msgs) about a proposed takeover.

Octavian sent letters to Midwest's board, according to a filing with the Securities and Exchange Commission, saying that it "is irresponsible and wrong for the company not to abide by its fiduciary responsibility to engage with AirTran."

AirTran has been trying to buy Midwest since the fall; the latest bid values Midwest at $389 million, or $15 per share. Midwest was up nearly 1% to $14.54 today. The stock has been climbing steadily over the last year. AirTran was down 0.6% to $10.22.

AirTran executives met with Midwest's board last week to discuss the bid, but there have been no further developments.

Waiting on the Bancrofts

Everybody, especially Rupert Murdoch, is waiting for the Bancroft family, which controls the voting shares of Dow Jones (DJ, news, msgs), to decide whether to accept the $5 billion bid from Murdoch's News Corp. (NWS, news, msgs)

Investors seem to think the family may pass on Murdoch's $60-per-share bid. Dow Jones shares closed down 3.7% to $52.67 today and have fallen 14.7% since peaking at $61.76 on June 5.

Dow Jones' board of directors voted for the deal, but some family members are still skeptical about whether Murdoch will protect the integrity of the company's flagship newspaper, The Wall Street Journal.

One family member who had originally been neutral is now against the deal, The Wall Street Journal reported. Jane McElree, whose voting shares make up 15% of the family's stake, said she is against Murdoch's takeover plan, the paper wrote.

Murdoch only needs half of the Bancrofts' shares for his deal to go through.

By Charley Blaine and Elizabeth Strott