4:20 pm : Stocks tumbled Tuesday as an overly pessimistic market exaggerated everything from the implications of an unwinding in the yen carry trade to potential defaults by subprime lenders spilling over into an economy that again showed signs of slowing.
Before the bell, February retail sales rose just 0.1% (consensus 0.3%) while the more closely-watched sales, ex-autos, unexpectedly fell 0.1% (consensus 0.3%). Both figures pressured a market already extremely sensitive to signs of potential economic weakness even though unseasonably cold weather was a likely cause for the soft report. It is also worth noting that the data won't alter expectations of about 2% real GDP growth in Q1.
However, with subprime mortgage worries acting as an overhang for weeks now, more negative developments in the space took a weak stock market and made it even weaker as sellers found another excuse to take some money off the table following three straight days of gains for the Dow and S&P 500.
Accredited Home Lenders (LEND 3.97 -7.43) was the latest company in the subprime lineup to warn of such difficulties, saying it needs to raise new funds to cover the risk of default. The stock lost nearly 70% of its value. Adding insult to injury was Countrywide Financial's (CFC 33.49 -1.65) CEO saying on CNBC that the subprime issue is becoming a "liquidity crisis."
But the straw that broke the backs of the bulls today was a report midday from the Mortgage Bankers Association which showed delinquencies among subprime borrowers hit 13.3% in the fourth quarter. That was the highest rate in more than four years!!
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