Stocks today gave up part of the large gains they scored Tuesday as credit concern returned to the market. A sharp retreat in commodity prices, including gold, also weighed on the market.
The Dow Jones industrial average closed down 293.0, or 2.36%, at 12,099.66; the S&P 500 dropped 32.32, or 2.43%, closing at 1,298.42 and the Nasdaq composite fell 58.3, or 2.57%, to close at 2,209.96. All numbers are preliminary.
Merrill Lynch & Co. announced today that it was suing XL Capital Assurance to require the bond insurer to meet its contractual obligations for credit default swaps it agreed to. The statement came amid talk that XL Capital would cancel insurance on $3 billion of collateralized debt obligations.
Credit swaps are an area of increasing concern for market participants, industry sources said. Any easing of financial market stress and narrowing of corporate credit risk premia requires an equity market rally, said John Lonski, managing director at Moodys Investors Service.