Stocks tumbled on Tuesday, bringing the Dow Jones industrial average below 11,000 and dragging benchmark indexes down from five-month highs, amid concern banks will be forced to buy back soured mortgages.
The Dow Jones industrial average closed down 165.07 points, or 1.48%, at 10,978.62; the S&P 500 fell 18.81, or 1.59%, ending at 1,165.90; and the Nasdaq composite closed down 43.71, or 1.76%, at 2,436.95. All numbers are preliminary.
Bank of America fell 3.4%, erasing an earlier gain of 0.9%, after people familiar with the matter said PIMCO and the Federal Reserve Bank of New York are seeking to make the bank buy loans that were packaged into $47 billion of bonds. A bondholder group including PIMCO and BlackRock wrote to Bank of America and Bank of New York Mellon, the debt’s trustee, citing alleged failures by the bank’s Countrywide Financial unit to service the loans properly, their lawyer said yesterday in a statement that didn’t name the firms.
An index of financial stocks in the S&P 500 tumbled 1.5% after it increased 0.6% earlier in the day as Goldman Sachs Group led a rally in bank stock after reporting third-quarter profit that beat estimates.