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Wall Street down 200 as credit woes continue
Trader Louis Paolillo, second left, watches the numbers as he works on the floor of the New York Stock Exchange, Thursday morning, Aug. 16, 2007. Stocks fell sharply Thursday after a move by Countrywide Financial Corp. confirmed fears of widening problems with some mortgages and tighter access to credit. - photo by Associated Press

    NEW YORK - Wall Street plunged again Thursday, extending an almost relentless downward spiral after problems at Countrywide Financial Corp. confirmed investors' fears that credit problems are spreading. The market shrugged off the Federal Reserve's injection of $17 billion into the banking system, and the Dow Jones industrial average fell more than 200 points.

Investors' confidence, already diminished by months of bad news about mortgages and credit, took a further pummeling after Countrywide, the nation's largest mortgage lender, said it was forced to draw on an $11.5 billion credit line to fund operations.

The Dow's drop pulled the blue chip index into what's known on Wall Street as a correction, a 10 percent drop in stock prices from their highs. Since the Dow reached a closing high of 14,000.41 on July 19, it has fallen 1,348 points.

The market seemed unfazed as the New York Fed _ which carries out the central bank's market operation _ announced an overnight repurchase agreement worth $12 billion. This was on top of a 14-day "repo" worth $5 billion announced before the market opened.

Central banks around the world have been supplying billions of funds to banks in the past week to make cash available for lending and keep interest rates from rising amid signs that credit was drying up. The Fed uses a repo to buy securities from dealers, who then deposit the money into commercial banks.

But, it has done little to offset fears about steeper losses for financial institutions squeezed by weeks of volatility that showed no signs of abating. Analysts contend many institutional investors want the Fed to be even more decisive.

"The concern out there is how bad are these problems with some of the financials, and everyone is looking for the Fed to aggressively cut rates to bail out the market," said Peter Dunay, an investment strategist with New York-based Leeb Capital Management. "The Fed is not eager to cut rates each time the market declines, and they're sending a message to the market that you might be on your own for a little bit."

And, a sell-off overseas offered little reason to try to stanch the bleeding a day after the Dow closed below the 13,000 mark for the first time since April and the Standard & Poor's 500 index moved into negative territory for the year.

In mid afternoon trading, the Dow tumbled 209.24, or 1.63 percent, to 12,652.23 after being down 343.53 earlier.

The S&P shed 20.22, or 1.44 percent, to 1,386.48, and the Nasdaq composite index dropped 43.14, or 1.75 percent, to 2,415.69. The Russell 2000 index of smaller companies fell 2.67, or 0.36 percent, to 748.87.


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