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Wall Street falls after housing data

(Agencies)
Updated: 2008-01-28 23:55

NEW YORK -- A jittery Wall Street lost more ground Monday, extending Friday's sharp drop after new home sales fell more than anticipated and earnings reports failed to impress investors.

The Commerce Department reported that sales of new homes in December fell by 4.7 percent, and that 2007 new home sales plunged by a record 26.4 percent compared to 2006.

The dismal results magnified investors' worries that there may be more massive write-downs by big banks for subprime loan losses, and that another potential rate cut by the Federal Reserve on Wednesday might not be enough to stoke the weakening US economy.

The market discovered troubling clues about the economy in ostensibly upbeat profit reports. Fast food seller McDonald's, a Dow component, said its quarterly profit rose 3 percent due to tax benefits and strong sales, but December US sales were flat with a year ago as cash-strapped consumers pared back spending. And while Verizon, another Dow component, reported a 3.9 percent improvement in profit, the results met analyst expectations but did not exceed them.

Verizon shares fell $1.43, or 3.9 percent, to $36.33, while McDonald's shares fell $4.34, or 8 percent, to $49.76.

The Dow Jones industrial average fell 74.46, or 0.61 percent, to 12,132.71.

Broader stock indicators also retreated. The Standard & Poor's 500 index fell 6.53, or 0.49 percent, to 1,324.08, while the Nasdaq composite index fell 16.39, or 0.70 percent, to 2,309.81.

A series of events this week, including anticipated references to the economy in President Bush's final State of the Union address Monday evening and the Federal Reserve's interest rate announcement, are expected to influence trading. The Fed lowered rates by 0.75 of a percentage point Tuesday, and traders are betting on another rate cut after the central bank's meeting lets out Wednesday afternoon.

Hopes for a very large cut, however, have been tempered by news that French bank Societe Generale sold European index futures to close positions taken by an alleged rogue trader. It is now thought that those trades may have aggravated the massive losses one week ago in Europe and Asian trading, when the US markets were closed.

Overseas markets fell Monday amid continuing economic concerns and also in response to Friday's decline on Wall Street. In Tokyo, the Nikkei stock average dropped 4 percent and in Shanghai, plunged 7.19 percent. European bourses also were largely under pressure, as London's FTSE 100 fell 2.05 percent, Frankfurt's DAX gave up 1.22 percent and Paris's CAC 40 lost 1.54 percent.



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