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Wall Street extended its steep decline today as investors already anxious after the second-biggest market drop this year digested a stronger-than-expected read on the economy. The Dow Jones industrials fell more than 130 points.
Wall Street shuddered Thursday amid worries over the U.S. mortgage and corporate lending markets, sending the Dow down by as much as 450 points before it closed with a deficit of 311. Investors globally took flight from equities, shifting cash into safer investments in Treasurys.
The Commerce Department reported Friday that the U.S. economy was strong during the second quarter as the drag from the housing sector lessened. GDP during the quarter was up at a 3.4 percent annual rate April through June, compared to a prediction of 3.3 percent by economists.
"I think you've got bargain hunters out there for sure and I think you've got some people who are still scared," said Randy Frederick, director of derivatives at Charles Schwab Co., explaining the jittery markets Friday. He contends many bargain hunters could retreat if the Dow falls much beyond 100 points.
"We're seeing the convergence of a whole host of sort of unrelated or only slightly related issues," he said. Frederick contends market volatility will remain as investors sort through issues such as the availability of credit for corporate buyouts, soured subprime mortgages and rising energy prices.
In midday trading, the Dow fell 128.92, or 0.96 percent, to 13,344.65.
Broader stock indicators also fell. The Standard Poor's 500 index fell 16.56, or 1.12 percent, to 1,466.10, and the Nasdaq composite index fell 23.02, or 0.89 percent, to 2,576.32.
Declining issues outnumbered advancers by about 2 to — on the New York Stock Exchange, where volume came to a heavy 935.2 million shares.
Bonds added to a huge advance logged Thursday. The yield on the benchmark 10-year Treasury note fell to 4.75 percent from 4.79 percent late Thursday. Investors were clearly seeking the relatively safety of bonds. The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude rose 72 cents to $75.67 on the New York Mercantile Exchange.
Although the GDP reading might have reassured investors that the economy was more than holding up even with soaring fuel prices, it also raised the possibility that the Federal Reserve, ever vigilant about inflation, might lean toward raising interest rates. Higher rates would exacerbate the market's intensifying concerns about credit.
Investors seemed little-moved by a stronger-than-expected consumer sentiment reading. the Reuters/University of Michigan index rose to 90.4 in July from 85.3 in June.
There was little corporate earnings news for traders to mull over, with about half the Standard Poor's 500 index already having posted results over the past few weeks. The biggest earnings news came from Chevron Corp., which reported second-quarter profit climbed 24 percent to surpass analyst estimates as the second largest U.S. oil company cashed in on higher gasoline prices. Chevron fell $2.15, or 2.5 percent, to $85.31.
Evidence that not all private-equity deals have screeched to a halt came as Lee Equity Partners LLC struck a deal to acquire retailer Deb Shops Inc. for about $391.1 million. Deb rose 22 cents to $26.90.
Also, medical device maker Medtronic Inc., seeking to expand its spinal products business, said it would acquire device maker Kyphon Inc. for $3.9 billion. Kyphon jumped $13.31, or 24.8 percent, to $66.99. The stock rose as high as $68.40.
Uneasy Wall Street continues down
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