Bhutto death, weak data send stocks down

2007-12-27 07:08:25 THE ASSOCIATED PRESS

NEW YORK - Stocks fell in early trading Thursday after the assassination of Pakistani opposition leader Benazir Bhutto and after the U.S. government reported a weak increase in durable goods orders.

Bhutto's assassination raised the possibility of increasing political unrest abroad, always an unsettling prospect for investors. Oil, gold and bond prices rose following the news.

Meanwhile, the Commerce Department said orders for durable goods X big-ticket items from commercial jetliners to home appliances X rose by just 0.1 percent last month. Economists had been looking for a rise of 2.2 percent. Still, November saw the first rise in durable-goods orders in the last four months.

The notion that the economy is slowing was also unnerving for the market.

Meanwhile, the Labor Department said the number of workers seeking unemployment benefits rose slightly last week.

In the first hour of trading, the Dow Jones industrial average fell 64.13, or 0.47 percent, to 13,487.56.

Broader stock indicators also fell. The Standard & Poor's 500 index fell 7.10, or 0.47 percent, to 1,490.56, and Nasdaq composite index fell 10.31, or 0.38 percent, to 2,714.10.

Bond prices rose sharply as investors worried about political instability sought the safety of U.S.-backed investments. The yield on the 10-year Treasury note, which moves opposite its price, fell to 4.21 percent from 4.29 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude rose 49 cents to $96.46 per barrel in pre-opening trading on the New York Mercantile Exchange.

The move lower in stocks came as Wall Street awaited a weekly reading on domestic crude oil inventories and a report on consumer confidence. Stocks have managed to increase for the past four trading days, posting a modest increase Wednesday as investors tried to reconcile their expectations with somewhat disappointing results from retailers.

The battered financial sector again commanded some of Wall Street's attention following predictions by Goldman Sachs that the flood of writedowns at banks will continue.

Goldman predicted Citigroup Inc. may be forced to write off 70 percent more than the $8 billion to $11 billion Citi forecast in early November. Citi could also cut its dividend by 40 percent and may need to raise $5 billion to $10 billion more cash, Goldman estimates.

Citi, one of the 30 stocks that makes up the Dow Jones industrials, fell 74 cents, or 2.4 percent, to $29.71.

In other corporate news, Sallie Mae fell $2, or 9 percent, to $20.13 after saying it would sell $2.5 billion in stock and use a bulk of the proceeds to settle contracts requiring the company to buy back stock at prices above current levels. The student lender, officially known as SLM Corp., shares fell sharply last week amid concerns about the company's plans following a the collapse of a $25 billion buyout deal.

Overseas, Japan's Nikkei stock average fell 0.57 percent. In afternoon trading, Britain's FTSE 100 rose 0.23 percent, Germany's DAX index gained 0.58 percent, and France's CAC-40 added 0.16 percent.