US stocks pull back on credit fears

Wall Street pulled back in erratic trading today as investors grew more concerned about a deteriorating housing market and the widening impact of soured debt after Citigroup Inc. warned it plans to book eight billion dollars to 11 billion dollars in additional losses.

Citi’s expected losses came on top of the 6.5 billion dollars in asset markdowns and other credit-related losses the company recorded in the third quarter.

The re-emergence of credit concerns – like those that pummeled Wall Street this summer – comes as the market is also contending with concerns about housing and the health of consumer spending, and with rising expectations that the Federal Reserve is leaning away from cutting interest rates when it meets next month.

Meanwhile, a central banker’s warning today that the subprime mortgage market will likely deteriorate further added to the pressure on stock prices. Fed Gov Randall Kroszner told the Consumer Bankers Association Fair Lending Conference in Washington that “conditions for subprime borrowers have the potential to get worse before they get better”.

The problems may be spreading. A Federal Reserve survey of banks showed that lenders are making it harder to get a home loan, even for borrowers with good credit. About 40% of respondents said they had tightened lending standards on prime mortgages during October, up from just 15% in July.

“We’re at the point now where more and more evidence is starting to emerge that the next 12 months are going to be more difficult,” said Joe Battipaglia, market strategist with Stifel Nicolaus & Co.’s private client group.

“Problems in housing market are getting deeper and more treacherous,” as home inventories rise and sale prices fall.

According to preliminary calculations, the Dow Jones industrial average fell 51.70, or 0.38%, at 13,543.40. The Dow was down nearly 150 points early in the session and briefly popped into the plus side in the late afternoon.

Broader stock indicators also fell. The Standard & Poor’s 500 index fell 7.48, or 0.50%, to 1,502.17, and the Nasdaq composite index fell 15.20, or 0.54%, to 2,795.18.