US stocks dipped to the lowest levels since 2006 on Monday, dragged down by a drop in financial shares amidst expectations that a slowing economy and escalating subprime mortgage crisis will further erode their earnings. ( dpa )
Financial giant Bear Stearns Cos lost the most since 1987, while Fannie Mae and Freddie Mac, the largest US mortgage finance providers, both lost more than 11 per cent, Bloomberg financial news service reported.
Banks posted 188 billion dollars in subprime-related losses on Monday and analysts forecast earnings for members of the S& P 500 index will decline this quarter and next.
Foreclosure filings in the US reached about 1.5 million homes in 2007, more than a 50 per cent increase over the 900,000 foreclosures in 2006, a Brookings Institution report said recently.
About half of the 1.5 million homeowners in foreclosure in 2007 were likely to work out a settlement with their lenders, while the remaining 750,000 are likely to lose their homes, the report said.
Mark Zandi, a Moody's economist, estimated before Congress recently that 2 million families could lose their homes by late 2009. Zandi has also projected that housing values will drop 20 per cent, leaving 14 million families with negative equity in their homes, the Brookings report said.
The Dow Jones Industrial Average of blue chips shed a whopping 153.54 points, or 1.29 per cent, to close at 11,740.15. The broader S& P 500 Index dropped 20 points, or 1.55 per cent, to 1,273.37, down almost 19 per cent from its October 9 record. The high tech NASDAQ composite index lost 43.15 points, or 1.95 per cent, to 2,169.34.
Bloomberg reported that the benchmark for US stocks was approaching a so-called bear market, which is marked by a decline of at least 20 percent from a peak.
The US currency climbed against the euro to 65.18 euro cents from 65.11 euro cents on Friday, but fell against the Japanese currency to 101.80 yen from 102.66 yen on Friday.
Gold prices dropped 2.40 dollars to 971.80 dollars per fine ounce.