Ma Bell Crushes Stocks
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Rumors of a Countrywide Financial bankruptcy and comments from AT&T that raised slowdown fears sent stocks plunging on Tuesday.
AT&T CEO Randall Stephenson told Bloomberg that the company is experiencing "softness" in its phone and broadband businesses and is disconnecting more customers for failing to pay their bills. AT&T shares cut their losses in half but still ended the day 5% lower, but the rest of the market ended the day at its lows, with the major indexes back in 10% "correction" territory.
Countrywide once again denied bankruptcy rumors that have swirled around the nation's top mortgage lender, but its shares still fell 28% to a new 52-week low. E*Trade shares also hit a new yearly low, down 20% on the day.
Federal Reserve officials have yet to step up their campaign of interest rate cuts despite the growing chance of recession, and comments from Fed officials on the issue have been mixed this week, with some concern about inflation remaining. Fed chairman Ben Bernanke could settle the issue when he speaks on Thursday.
Leap Wireless gained 6% on strong subscriber growth.
VMware and Nvidia bounced back from recent declines with 2% gains, with Nvidia unveiling a new high-end graphics offering.
Seagate fell 4% on a downgrade, and Microsoft was off more than 3% on the acquisition of enterprise search company FAST.
Oracle was down 5% after CEO Larry Ellison sold shares under a prearranged trading plan.
Credence Systems fell 20% after missing sales estimates and announcing plans for 30% layoffs. Citigroup reiterated its "sell" rating and $1 price target. The stock closed at $1.79.
The Nasdaq fell 59 to 2440, the S&P tumbled 26 to 1390, and the Dow plunged 238 to 12,589. Volume rose to 4.7 billion shares on the NYSE, and 2.65 billion on the Nasdaq. Decliners led by a 21-11 margin on the NYSE, and 21-9 on the Nasdaq. Downside volume was 80% on the NYSE, and 80% on the Nasdaq. New highs-new lows were 58-518 on the NYSE, and 66-444 on the Nasdaq.