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Markets fall because rate cut too small { November 2007 } Original Source Link: (May no longer be active)
http://www.bloomberg.com/apps/news?pid=20601087&sid=aVomrDOORtRc&refer=homehttp://www.bloomberg.com/apps/news?pid=20601087&sid=aVomrDOORtRc&refer=home
U.S. Stocks Fall After Fed Cuts Benchmark Rate by Quarter Point
By Eric Martin
Dec. 11 (Bloomberg) -- U.S. stocks dropped after the Federal Reserve cut its benchmark interest rate by a quarter- percentage point, spurring concern borrowing costs need to fall further to boost economic growth.
Washington Mutual Inc., the largest U.S. savings and loan, declined the most in a month after saying it plans to write down the value of its home-lending unit and cut its dividend. Freddie Mac, the second-biggest mortgage-finance company, fell after forecasting a wider loss than analysts had estimated.
The Standard and Poor's 500 Index lost 14.04, or 0.9 percent, to 1,501.92 as of 2:21 p.m. in New York. The Dow Jones Industrial Average retreated 119.9, or 0.9 percent, to 13,607.13. The Nasdaq Composite Index decreased 20.96, or 0.8 percent, to 2,697.99. About three stocks fell for every one that rose on the New York Stock Exchange.
The Fed cut its target rate for overnight loans between banks to 4.25 percent. Before the announcement, futures trading showed 36 percent odds of a reduction to 4 percent. The central bank also reduced the rate it charges banks for direct loans by half a percentage point to 4.75 percent.
Washington Mutual dropped $1.62 to $18.26. The company will slash its dividend by 73 percent, write down the value of its home-lending unit by $1.6 billion in the fourth quarter and cut about 6 percent of its workforce as mortgage-market losses increase.
Freddie Mac
Freddie Mac slid $2.03 to $33.01 after saying fourth- quarter results are not going to be better than a third-quarter loss of $2.02 billion, or $3.29 a share. Analysts in a Bloomberg survey had estimated a loss of about $1.27 a share, excluding some items. The company, which owns or guarantees one in five U.S. home loans, said it does not see a ``silver bullet'' or ``short-term quick fix'' to the housing market deterioration that caused it to cut its dividend in half last month.
Financial companies have lost more than $70 billion this year after writing down the value of bonds tied to mortgages.
Texas Instruments Inc. advanced 65 cents to $33.32. Fourth- quarter sales will increase to a range of $3.5 billion to $3.66 billion, compared with an October forecast of $3.4 billion to $3.68 billion, the Dallas-based company said yesterday. Texas Instruments also raised the low end of its profit forecast.
AT&T Inc., the nation's largest phone company, added $2.18, or 5.8 percent, to $40.08. The new quarterly dividend is 40 cents, the San Antonio-based company said. The buyback is for as many as 400 million shares. Per-share profit will show ``double- digit'' growth next year, the company also said.
Last Updated: December 11, 2007 14:22 EST
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