( Reuter )- U.S. stocks tumbled on Thursday, pushing Wall Street close to January lows, as investors sold-off financial shares on news of a default at a high-profile mortgage lender.
Concerns about the financial stability of Thornburg Mortgage Inc (TMA.N), a "jumbo" mortgage lender, along with a report showing that U.S. mortgage foreclosures reached a record high, dealt the market a heavy blow and sent financial shares to their sixth straight day of losses.
Shares JPMorgan Chase & Co (JPM.N), the No. 3 U.S. bank, led financial-sector drags on the S& P 500 with a drop of 3 percent, while shares of insurer American International Group Inc (AIG.N) were the top financial drag on the Dow, down 2.8 percent.
"We are dealing with a market that at this point is still very, very jittery, wondering what's going to come out of the closet next," said Frederic Dickson, senior vice president and market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.
"Investors seem to be moving to the safest instruments around or just diving into their fox holes. This looks pretty much like an across-the-board sell-off."
The Dow Jones industrial average (.DJI) was down 133.10 points, or 1.09 percent, at 12,121.89. The Standard & Poor's 500 Index (.SPX) was down 18.67 points, or 1.40 percent, at 1,315.03. The Nasdaq Composite Index (.IXIC) was down 31.75 points, or 1.40 percent, at 2,241.06.
At one time, the S& P skirted its January 22 closing low of 1,310.50, a breach of which analysts say would spell more downside for the broader market.
Thornburg Mortgage Inc (TMA.N), a "jumbo" mortgage lender, said it had received a letter from JPMorgan Chase notifying it of a default after it failed to meet a margin call of about $28 million. Its shares tumbled nearly 52 percent to $1.65 on the New York Stock Exchange.
Shares of JPMorgan fell 3 percent to $37.55. AIG declined 2.8 percent, to $43.35.
The Mortgage Bankers Association said U.S. home foreclosures and the rate of homes entering foreclosure hit record highs in the fourth quarter of 2007.
Shares of hard-hit bond insurer Ambac Financial Group (ABK.N) dropped almost 6.7 percent to $8.12. Ambac's slide followed concern that the company's plan to raise capital may not provide it with enough cash to shore up its credit-worthiness in the long run.
Banks have made a firm commitment to buy more than $500 million of Ambac's shares in a planned $1.5 billion offering -- if other investors don't buy them, according to a person briefed on the matter.
Before the opening bell, Goldman Sachs cut price targets on the shares of Ambac and another bond insurer MBIA Inc (MBI.N). Goldman also said Ambac's capital plan announced Wednesday would fall $1 billion short of an estimated requirement.
Shares of U.S. home finance companies Fannie Mae (FNM.N) and Freddie Mac (FRE.N) fell to their lowest levels in more than a decade as concerns about fallout from the housing slump rattled investors.
Fannie Mae dropped 9 percent to $22.15 and shares of Freddie Mac tumbled 7.1 percent to $20.09.
Adding to concerns about the financial sector, a Dutch-listed affiliate of private equity firm Carlyle Group said it has not been able to meet some margin calls and has received a notice of default.
Four mortgage real estate investment trusts, or REITs, ranked among the biggest decliners on the New York Stock Exchange, including Anworth Mortgage Asset Corp (ANH.N). Its shares tumbled 23.5 percent to $6.77.
Only one of the Dow's 30 components traded higher. Wal-Mart Stores Inc (WMT.N) stock was up 1.3 percent at $50.24 after the world's largest retailer beat sales estimates.