Dow falls 218 as credit fears slam stocks

Thanksgiving week is usually quiet as traders start to think about heading out for a long weekend.

But if today is any indication, Thanksgiving week 2007 may be anything but quiet.

Stocks tumbled at the open and stayed down all day long as investors around the world continued to worry about the subprime-mortgage mess, the financial health of the American consumer, higher oil prices and the weakening dollar.

The Dow Jones industrials closed down about 218 points, or 1.7%, to 12,959. The Standard & Poor's 500 Index fell 25 points, or 1.8%, to 1,433. The Nasdaq Composite Index finished down 44 points, 1.7%, to 2,593.

But after the bell, Dow component Hewlett-Packard (HPQ, news, msgs) cheered investors a bit with a 28% fourth-quarter profit gain, and shares were higher in after-hours trading.

Today's was the seventh loss for the Dow in the last 10 sessions and the seventh loss of 100 points or more since the index closed at an all-time high of 14,164.53 on Oct. 9. It was the worst close for the S&P 500 since Aug. 28.

Twenty-seven of the 30 Dow stocks were lower on the day, along with 435 S&P 500 stocks and 84 of the stocks in the Nasdaq-100 Index ($NDX.X). The Nasdaq-100 fell 1.3% to 2,021.

Since peaking on Oct. 9, the Dow is off about 8.5%, and the S&P 500, which is heavily influenced by financial stocks, is down 8.3%. The Nasdaq has fallen 9.3% after reaching 2,859.12 on Oct. 31, its best close since January 2001.

Stocks are likely to remain volatile Tuesday and Wednesday in part because some key earnings reports will come out, including one from Target (TGT, news, msgs) on Tuesday morning.

In addition, minutes from the Federal Reserve's Oct. 30-31 meeting will be released at 2 p.m. Tuesday, which will include a new Fed forecast for the economy. And the Commerce Department will report housing starts for October on Tuesday morning.

Lastly, the market will ponder reports that a sale of $4 billion in bonds backing Cerberus' Chrysler purchase has been postponed. Orders for the paper were due today, The Wall Street Journal reported. So far, demand has been sluggish.

Financials pull the market down

As has been the case since last summer, financial stocks bore the brunt of investors' fury. Dow component Citigroup (C, news, msgs) fell 5.9% to $32 after being downgraded to "sell" from "neutral" by Goldman Sachs (GS, news, msgs). Citigroup's problems hit other financial stocks hard as well. The Standard & Poor's Banking Index ($BIX.X) fell 3% to 283, and the Amex Securities Broker/Dealer Index ($XBD.X) fell 4% to just under 201.

Even Goldman Sachs, arguably the most profitable of the big Wall Street investment houses, was hit by the selling. Its shares were down 2.1% to $220.54.

General Motors (GM, news, msgs) was actually the biggest loser among the 30 Dow stocks, down 8.5% to $26.79, on reports GMAC Financial Services, the old General Motors Acceptance Corp., is seeing more delinquencies among its auto loans.

GM, trying to regain profitability again, has been stung in recent months by the weak performance at GMAC, which has struggled due to losses at its residential-mortgage business.

The auto lending business was supposed to be profitable, but Lehman Bros. analyst Brian Johnson said in a research note today that GMAC has experienced a "sharp" increase in delinquency rates among those customers since July.

GM sold a majority interest in GMAC to Cerberus Capital Management last year. Cerberus also owns Chrysler Group.

Also investors were worried about the cost of a new GM incentive program designed to cut its inventory of unsold vehicles.

As bad as the losses were for the major indexes, there were bigger losses among some key indexes.

Metals and materials stocks were clobbered as gold, copper and silver prices fell. Gold fell 2.2% to $778 an ounce in New York. The Select SPDR Materials (XLB, news, msgs) exchange-traded fund, which is supposed to mirror the S&P 500 materials sector, fell more than 2.6% to $39.12. Copper giant Freeport-McMoRan Copper & Gold (FCX, news, msgs) fell 7.7% to $92.39. The stock is down just under 19% since Oct. 11. U.S. Steel (X, news, msgs) slumped 3.5% to $86.42; the stock has fallen 23% since Oct. 29.

The Dow Jones Transportation Index ($TRAN) fell 2.3% to 4,458. The Russell 2000 Index ($RUT.X), which tracks small-capitalization stocks, was down 2.5% to 750.

The woes of the transportation index were mostly due to weakness in airlines, hit by rising fuel costs, and weak volumes experienced by trucking companies. AMR Corp. (AMR, news, msgs) was off 4.9% to $21.38. JetBlue Airways (JBLU, news, msgs) fell 5.8% to $7.01. Ryder System (R, news, msgs) fell 5.6% to $41.12.

The January crude oil contract in New York closed up 80 cents a barrel to $94.64. Crude had hit $98.62 a barrel on Nov. 7.

The Russell's decline of late has been due to investors seeking safety in large-cap stocks and bonds.

While the Dow is still up 4% on the year and the Nasdaq is sporting a 7.4% gain, the Russell is down 4.7%. The Dow transportation index is down 2.2%.

Notebook sales power Hewlett-Packard earnings

For a stock market in desperate need of good news, Hewlett-Packard delivered after today's close.

The tech giant's shares jumped 0.8% to $49.95 in after-hours trading after the company said its fiscal-fourth-quarter profit rose 28% from a year ago, and it raised guidance for the current quarter.

H-P said net income in the three months through Oct. 31 jumped to $2.16 billion, and earnings hit 86 cents a share, beating Wall Street's expectations by 4 cents. Results were fueled by strong demand for personal computers and a sharp improvement in its software business.

Revenue jumped 15% to $28.29 billion from $24.56 billion. Sales of notebook computers jumped 49%; desktop computer sales jumped 15%. Sales in emerging markets, especially China, were also strong.

Analysts, on average, were expecting a profit of 82 cents per share on sales of $27.4 billion, according to Thomson Financial.

In regular trading, H-P had closed down 2.6% to $49.44. The stock had fallen 7.4% after hitting a seven-year high on Nov. 6 at $53.41.

Meanwhile, the world's largest PC maker said its board had approved the repurchase of an additional $8 billion in stock.

HP expects first-quarter earnings, adjusted for one-time items of 80 cents per share and revenue between $27.4 billion and $27.5 billion. Analysts have been forecasting a first-quarter profit of 77 cents per share on sales of $27.03 billion.

Nordstrom cuts December guidance

Upscale department store chain Nordstrom (JWN, news, msgs) said it earned 59 cents a share in the third quarter, better than Wall Street estimates. Net income was up 22% to $165.7 million.

Shares jumped 9.9% to $33.54 in after-hours trading after the company said December sales will be likely be lower than a year ago. The result will be to produce little sales growth for the fourth quarter.

Third-quarter revenue was up 5% to $1.97 billion from $1.87 billion a year ago, just ahead of analysts' estimate for $1.96 billion in sales.

Nordstrom shares had fallen 6.1% to $30.52 in the regular session.

Energy prices -- New York close

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$94.64	$93.84	$0.80	0.12%	55.02%
Heating oil (per gallon)	$2.6042	$2.5871	$0.0171	3.84%	62.98%
Natural gas (per million BTU)	$7.7870	$8.0010	-$0.2140	-6.52%	23.62%
Unleaded gasoline (per gallon)	$2.3816	$2.3754	$0.0062	1.78%	48.65%

A bigger Citigroup write-down ahead?

Goldman Sachs analyst William Tanona downgraded Citigroup's shares to "sell" from "neutral," saying that the banking giant may take charges of up to $15 billion over the next two quarters for bad bets on collateralized debt obligations, including securities backed by subprime mortgages.

Tanona's estimate is higher than Citigroup's estimate earlier this month of write-downs between $8 billion and $11 billion -- the announcement of which forced Chuck Prince to resign from his post as chief executive officer. Citigroup had reported $2.2 billion in write-downs for the third quarter.

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Tanona also cut his price targets on a number of financial-services companies. Tanona slashed targets for Merrill Lynch (MER, news, msgs) to $59 from $66, Morgan Stanley (MS, news, msgs) to $46 from $51, Bear Stearns (BSC, news, msgs) to $106 from $118 and Lehman Bros. (LEH, news, msgs) to $70 from $71.

Merrill shares fell 4% to $53.87 on the day. Morgan Stanley was down 3.4% at $51.13; Bear Stearns slumped 5.1% to $94.05; and Lehman Bros. was down 2.9% at $60.55.

Fed governor warns about regulation

While the subprime-mortgage meltdown has roiled the financial-services sector, Minneapolis Fed President Gary Stern cautioned that a knee-jerk reaction to the mess could itself be problematic.

Speaking at a conference in Singapore today, Stern said that his message "was one of caution but not of inaction." Stern said that "we should take care in drawing conclusions about the recent bout of financial turbulence and about the implications for public policy."

But Stern also sounded wary about the housing sector.

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"Foreclosures are likely to go up over the next several quarters rather than down," Stern said. "I think the adjustment in the housing market still has a way to go."

The housing market has been struggling after many subprime, or high-risk, borrowers turned delinquent or defaulted on their mortgages after interest rates rose and housing prices fell this year.

Home builders have also been left with a glut of inventory, adding to the slumping market.

Lowe's results fall short

Home-improvement retailer Lowe's (LOW, news, msgs) this morning reported third-quarter earnings of $643 million, or 43 cents per share, a 10% decline from $716 million, or 46 cents per share, in the same quarter last year. Analysts had been looking for earnings of 43 cents per share.

Sales rose to $11.6 billion. That's up from $11.2 billion last year but short of the company's forecast of $12 billion and the consensus estimate of $11.8 billion.

Shares of Lowe's were down 7% to $23.25 this afternoon.

Lowe's slashed its full-year forecast to between $1.83 and $1.87 per share from a previous forecast of $1.97 to $2.01 per share. Analysts are expecting full-year earnings of $1.93 per share. For the fourth quarter, Lowe's now expects between 25 and 29 cents per share, below the consensus estimate of 36 cents per share.

Last week, rival Home Depot (HD, news, msgs) reported a 27% drop in profit for the third quarter, missing the consensus estimate. Home Depot was down 3% to $28.19.

Both retailers have been slammed by the slumping housing market. Lowe's shares are down 25% this year; Home Depot's are down 29%.

Lowe's sell-off mirrored selling in retail stocks generally. The Standard & Poor's Retail Index ($RLX.X) was down nearly 3% to 407. Wal-Mart Stores (WMT, news, msgs) was off 1.9% to $45.47. Macy's (M, news, msgs) fell 3.6% to $27.30.

Big biotech deal

Biotech company Celgene (CELG, news, msgs) is buying drug company Pharmion (PHRM, news, msgs) for $2.9 billion, or $72 per share.

Celgene specializes in cancer and inflammatory diseases, while Pharmion makes products to treat blood diseases and cancer. Pharmion's Vidaza drug is used to help treat blood-cell disorders that can precede leukemia.

• Video: More on Celgene's deal to buy Pharmion

Shares of Pharmion rose 34% to $65.96 this afternoon; Celgene shares were down 1.3% to $64.06.

Xerox to pay a dividend

For the first time in six years, Xerox (XRX, news, msgs) said it will pay a quarterly dividend on its shares.

CEO Anne Mulcahy said the dividend of 4.25 cents per share was made possible by improved business and a stronger balance sheet. Xerox last paid a quarterly dividend of 5 cents in 2001.

Xerox also said it will earn between $1.31 and $1.35 per share in 2008, higher than the consensus estimate of $1.31 for the full year.

Shares rose 1.8% to $16.10 this afternoon.

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

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	3.275%	3.290%	-0.015	-14.27%	-32.96%
5-year Treasury note yield	3.569%	3.676%	-0.107	-14.35%	-24.08%
10-year Treasury note yield	4.079%	4.150%	-0.071	-8.85%	-13.40%
30-year Treasury bond yield	4.478%	4.523%	-0.045	-5.75%	-7.06%
Currencies
U.S. Dollar Index	75.79	75.51	0.28	-0.93%	-9.49%
British pound in U.S. dollars	$2.0517	$2.0542	-0.0025	-1.40%	4.70%
U.S. dollar in British pounds	£0.4874	£0.4868	0.0006	1.41%	-4.49%
Euro in U.S. dollars	1.4669	1.4674	-0.0004	1.33%	11.13%
U.S. dollar in euros	€ 0.6817	€ 0.6815	0.0002	-1.32%	-10.02%
U.S. dollar in yen	¥109.78	¥110.79	-1.01	-4.88%	-7.76%
U.S. dollar in Canadian dollars	$0.98	$0.98	0.01	4.23%	-15.54%
Canadian dollar in U.S. dollars	$1.02	$1.03	-0.01	-3.98%	18.52%
Commodities
Gold	$778.00	$787.00	-$9.00	-2.18%	21.94%
Copper	$2.9835	$3.1615	-$0.178	-14.09%	3.92%
Silver	$14.1600	$14.1600	-$0.35	-1.93%	12.18%
Crude oil (NYMEX) (per barrel)	$94.64	$93.84	$0.80	0.12%	55.02%

By Elizabeth Strott and Charley Blaine