NEW YORK Wall Street extended its slide Friday after Wachovia Corp. warned it will take quarterly loan losses on its debt portfolio, raising investor concerns that the credit slump shows no sign of abating. The Dow Jones industrial average fell more than 110 points.
The nation's fourth-largest bank said in a filing with the Securities and Exchange Commission that credit market volatility could cause a $1.1 billion writedown for October alone, making it the latest in a series of financial institutions to report debt-related losses. The problem stems from its asset-backed securities, such as collateralized debt obligations, that have lost value on sinking investor demand.
Meanwhile, the nation's second largest bank, Bank of America Corp., said Friday that continued "market dislocations," including those related to the value of securities it owns that are backed by loans, will hurt its fourth quarter results. But the Charlotte, N.C. bank, did not provide an estimate of how large the impact will be.
Investors also were rattled by speculation that Barclays PLC was about to announce a $10 billion writedown. The British bank denied the rumors, but they demonstrated that Wall Street continues to worry that the summer's credit squeeze has a broader impact globally.
"The extent of the situation is unknown, and that uncertainty doesn't give investors any reasons to believe that a bottom might be in place," said Todd Salamone, director of trading and vice president of research at Schaeffer's Investment Research. "We just got more of the same this week rattling investors, and the question for investors becomes what's the next catalyst to drive stocks higher."
Further worries about the continuing credit market slump kept investors on edge a day after Federal Reserve Chairman Ben Bernanke said he expects the economy to "slow noticeably" this quarter.
He also said the dollar's weakness "may have some effect on import prices" which was confirmed Friday in new government data. The Commerce Department reported U.S. import prices soared last month at their fastest pace since early last year.
Meanwhile, the University of Michigan's preliminary November consumer sentiment index tumbled for its weakest performance since October 2005.
In late afternoon trade, the Dow Jones industrials fell 113.89, or 0.88 percent, to 13,149.39.
The Standard & Poor's 500 index was off 8.28, or 0.56 percent, at 1,466.497, while the Nasdaq composite index tumbled 43.03, or 1.6 percent, to 2,652.97.
Light, sweet crude for December delivery on the New York Mercantile Exchange rose 52 cents to $95.98 a barrel in afternoon trading in New York. Bond prices rose, with the yield on the benchmark 10-year Treasury note falling to 4.22 percent from 4.27 percent late Thursday. Yields and prices move in opposite directions.
The bond market will be closed Monday for the Veterans Day holiday observance. Meanwhile, both gold and the dollar were lower.
This was the second-straight week stocks were poised to drop amid further concerns about bank and brokerage writedowns from subprime mortgage and credit exposure.
Losses lightened as the afternoon wore on. Investors were expected to pay careful attention to price action just ahead of the close, as they have in recent sessions.
"You may get some bounces in the middle of the day, but don't read too much into them," said Peter Boockvar, equity strategist at Miller Tabak.
The financial sector saw minor gains for such recently battered stocks as Morgan Stanley, Citigroup Inc. and Merrill Lynch & Co Inc. But Robert Pavlik of Oaktree Asset Management warned that the gains would likely be short-lived. "These are the stocks that got hit the hardest in the last few weeks and this looks just like some short-covering," he said.
Investors were also uneasy about tech stocks after Qualcomm Inc., the nation's second-biggest maker of chips that run mobile phones, predicted that heightened competition and legal troubles will cause 2008 results to fall 4 percent to 7 percent below Wall Street projections.
Qualcomm fell $1.50, or 3.8 percent, to $38.28.
Cisco Systems Inc. was another drag on the technology sector. It fell 62 cents, or 2 percent, to $29.01 after the company warned of a dramatic decline in domestic business orders.
Wireless high-speed Internet provider Clearwire Corp. and Sprint Nextel Corp. announced before the bell they scrapped an agreement to jointly build a nationwide WiFi network. Clearwire also reported its third-quarter loss widened more than expected. Clearwire plunged $4.50, or 25 percent, to $13.54, while Sprint shed 9 cents to $16.45.
Merck & Co. said it will pay $4.85 billion to settle thousands of lawsuits over its painkiller Vioxx a move considered to be the biggest drug settlement ever. The offer was finalized early Friday as Merck and the plaintiffs met with three of the four judges overseeing the claims. Merck rose $1.83, or 3.3 percent, to $56.60.
Walt Disney & Co. shares fell 73 cents, or 2.2 percent, to $32.90 after the entertainment company said late Thursday fiscal fourth-quarter profit rose 12 percent, driven by sports network ESPN and turnout at its U.S. theme parks. However, executives remain concerned about a Hollywood writers strike that began this week.
Declining shares led advancers by a 2 to 1 ratio on the New York Stock Exchange, where volume came to 1.38 billion shares.
Overseas, Japan's Nikkei stock average closed down 1.19 percent and Hong Kong's Hang Seng index rose 0.08 percent. Britain's FTSE 100 was down 1.21 percent, Germany's DAX index fell 0.09 percent, and France's CAC-40 shed 1.91 percent.