Wall Street falls after BofA posts disappointing third-quarter results, more economic worries

Wall Street fell in early trading Thursday after Bank of America Corp. missed analysts' earnings expectations and provided investors with further evidence of how the credit crisis has affected the economy.

BofA, considered a bellwether for the banking industry because it has branches across the country, said "significant dislocations" in the capital markets caused third-quarter results to fall 32 percent. The disappointing results follows similar reports from other financial companies including Citigroup Inc. and Washington Mutual Inc.

Banks and brokerages have been hurt during the third quarter in the fallout from the subprime mortgage crisis. As people with weak credit defaulted on loans at an alarming rate, it triggered a global aversion for risk that led the credit markets to freeze up.

Treasurys rallied and the dollar fell to a new record low against the euro after a government report showed that the number of newly laid off workers filing claims for unemployment benefits shot up last week by the largest amount since February. The Labor Department's report was far worse than economists expected, and signaled that the labor market could be starting to weaken from a downturn in housing and the global credit turmoil.

In the first hour of trading, the Dow Jones industrial average fell 22.68, or 0.16 percent, to 13,869.86.

Broader indexes were also lower. The Standard & Poor's index fell 4.88, or 0.32 percent, to 1,536.36, while the Nasdaq composite index was down 8.68, or 0.31 percent, at 2,783.99.

The yield on the benchmark 10-year Treasury note, which moves inversely to prices, fell to 4.52 percent from 4.55 percent late Wednesday. Treasury prices rallied sharply Wednesday after investors' nervousness about housing was exacerbated by a dramatic plunge in building starts.

The market will also be looking at the Philadelphia Federal Reserve's October manufacturing index, being released at noon EDT. The report is expected to show a slowdown in growth for the regional economy.

Sluggish economic data could help motivate the U.S. Federal Reserve to cut interest rates at its Oct. 30-31 meeting. Central bankers cut rates by a half point at their September meeting.

Oil prices continued their advance due to further tensions between Turkey and Kurdish rebels in Northern Iraq. A barrel of light, sweet crude for November delivery rose 96 cents to $88.36 a barrel in electronic trading on the New York Mercantile Exchange.

Disappointing results from BofA made the market wary about other upcoming earnings reports, including Google Inc. and Advanced Micro Devices Corp. after the closing bell.

About 60 members of the Standard & Poor's 500 index have reported quarterly results so far this week. Most of the attention has been on the nation's biggest banks, which reported mostly disappointing results on write-downs from leveraged loans, mortgages, and consumer credit.

Bank of America said capital markets losses offset growth in other businesses, and the company doubled its loan-loss provisions. This caused net income to decline to 82 cents per share from $1.18 a year earlier — a big miss considering analysts polled by Thomson Financial projected a profit of $1.06 per share.

Shares of the Charlotte-based bank fell $1.90, or 3.8 percent, to $48.13.

E-Trade Financial Corp. late Wednesday reported an unexpected loss because of its exposure to credit markets. The discount brokerage took a $200 million write-down linked to mortgage-related investments, and its shares tumbled $1.04, or 8.4 percent, to $11.43.

Pharmaceutical stocks were weaker after Pfizer Inc. said third-quarter profit plunged due to a $2.8 billion pretax charge to end investment in the inhaled insulin drug Exubera. The world's largest drug company also had lower sales of blockbuster cholesterol drug Lipitor. The stock rose 19 cents to $44.74.

The Hershey Co., the nation's largest candy maker, said profit tumbled 66 percent because of lower sales and higher promotional costs. The maker of Hershey's Kisses and Reese's candy missed Wall Street projections, and shares fell $1.32, or 3 percent, to $42.97.

The Russell 2000 index of smaller companies fell 3.98, or 0.48 percent, to 820.91.

Overseas, Japan's Nikkei stock average closed up 0.89 percent. Britain's FTSE 100 fell 1.34 percent, Germany's DAX index fell 0.88 percent, and France's CAC-40 fell 1.13 percent.

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