Wall Street plunges on mortgage concerns, mixed earnings

10:33, October 20, 2010      

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Wall Street plunged on Tuesday on mortgage concerns and mixed earnings.

The U.S. stocks opened lower in the morning on mixed earnings and China's rate hike.

Goldman Sachs' third-quarter earnings fell short of analysts' expectations, while its investment banking business rose 24 percent from a year earlier.

The investment bank giant said the quarterly earnings were 1.74 billion U.S. dollars, or 2.98 dollars per share, well below the projected 3.03 billion dollars, or 5.25 dollars per share.

Bank of America, the nation's biggest bank, announced on Tuesday that operating profit rebounded in the third quarter, helped by improved credit conditions among consumers and businesses.

Due to a charge related to the credit and debit card reform legislation passed over the summer, the company lost 7.65 billion dollars during the third quarter. Without one-time charge, the bank earned 3.1 billion dollars, or 27 cents a share.

Shares of IBM fell more than 3 percent even after the company posted better-than-expected earnings and boosted its full-year guidance.

Apple shares were down more than 2 percent as iPad sales fell short of expectations and the company offered a conservative forecast for the current quarter.

The stocks were also hurt as the People's Bank of China said it will raise lending and deposit rates, the first time since 2007, to contain inflation and soaring property prices.

Oil prices fell more than 4 percent after China's move. Light, sweet crude oil for November delivery was down 3.59 dollars, or 4. 3 percent, to settle at 79.49 dollars a barrel on the New York Mercantile Exchange. It was the first time oil had settled below 80 dollars a barrel since September.

The losses in stock markets accelerated after reports said bondholders are seeking to force Bank of America to buy back billions of bad mortgages.

Bloomberg reported that Pacific Investment Management Co., BlackRock and the Federal Reserve Bank of New York are attempting to force Bank of America to repurchase 47 billion dollars of soured mortgages packaged by Countrywide Financial Group.

On the economic front, U.S. home construction unexpectedly rose in September, reaching its highest level since government home- buying incentives ended in April.

Housing starts increased 0.3 percent to 610,000, the Commerce Department said. But building permits fell 5.6 percent to 539,000.

The Dow Jones fell 165.20, or 1.48 percent, to 10,978.62. The S& P 500 declined 18.81, or 1.59 percent, to 1,165.90 and the NASDAQ was down 43.71, or 1.76 percent, to 2,436.95.



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