By DPA
Washington : US stocks dipped to the lowest levels since 2006 Monday, dragged down by a drop in financial shares amidst expectations that a slowing economy and escalating sub-prime mortgage crisis would further erode their earnings.
Financial giant Bear Stearns lost the most since 1987, while Fannie Mae and Freddie Mac, the largest US mortgage finance providers, both lost more than 11 percent, Bloomberg financial news service reported.
Banks posted $188 billion in sub-prime-related losses 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 percent 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 two million families could lose their homes by late 2009. Zandi has also projected that housing values would drop 20 percent, 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 percent, to close at 11,740.15. The broader S&P 500 Index dropped 20 points, or 1.55 percent, to 1,273.37, down almost 19 percent from its October 9 record. The high tech NASDAQ composite index lost 43.15 points, or 1.95 percent, 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.