Wall Street extends decline

Wall Street ratcheted its way through a fractious session today before finally closing lower on expectations of further fallout from the ongoing credit crisis.

The Dow Jones industrials, up more than 100 points during the day, ended below 13,000 for the first time since August.

Stocks lost ground for the fourth straight session. Analysts said investors had few reasons to sustain a rally, even with many stocks at enticingly low prices after recent routs.

The Nasdaq composite index was the biggest decliner among the major indexes as investors sold technology stocks.

News stories kept the subprime contagion in focus. Late on Friday, E-Trade Financial Corporation said the value of its mortgage-backed securities has fallen significantly and that it would need to take bigger-than-expected write-downs in the fourth quarter.

Meanwhile, troubled home lender Countrywide Financial said in a US regulatory filing it could be “severely” limited if its credit rating drops into junk status.

And Britain’s HSBC Holdings PLC was seen as the next major financial institution to write down losses from exposure to the debt markets, according to a report in The Times. The bank will announce a 1 billion charge to its portfolio of high-risk sub-prime mortgages when it reports third-quarter results from its US division, according to the report.

Investors were uncertain in the wake of heavy selling last week. “I don’t think anyone quite knows what to make of today’s market,” said Paul Nolte, director of investments at Hinsdale Associates. “It is a decent day, given all of the mess from last week. But this is very, very short-term. All we are doing is reversing some of the action from last week.”

Blue chips held on to some of their gains, but selling was especially strong in tech stocks as more investors succumbed to the view that the sector is not strong enough to provide the economy with a cushion against the weakness in housing.

Apple fell more than 7% after analysts described the weekend European launch of the iPod as disappointing.

The Dow fell 55.19, or 0.42%, to 12,987.55, after falling 4.06% last week.

The last time the Dow traded below 13,000 was on August 17, when it index hit a low of 12,847.24, and the last time it closed below 13,000 was on August 16, when it ended at 12,845.78.

The Dow has fallen 1,210.55, or 8.53%, from the record trading high of 14,198.10 that it reached on October 11. Its record high close was 14,164.53, set on October 9.

The Standard & Poor’s 500 index fell 14.52, or 1%, to 1,439.18, while the Nasdaq composite index dropped 43.81, or 1.67%, to 2,584.13.

Falling issues outnumbered advancing shares by about 2 to 1 on the New York Stock Exchange, where volume totalled 1.71 billion shares compared with 1.62 billion shares traded on Friday.

Trading in many corners of the market was light because of Veterans Day, with the government bond markets closed. This could account for some volatility as institutional traders sought positions ahead of economic reports, including readings on inflation, later in the week.

The dollar rebounded against other major currencies, bolstered by a sharp decline in the price of gold. Gold futures briefly fell under 800 an ounce before recovering some strength to close down 27 at 807.70 an ounce.

Light, sweet crude fell 1.70 to 94.62 a barrel on the New York Mercantile Exchange. The drop came on reports that Opec would discuss increasing its output at an upcoming meeting in a bid to cool record crude prices.

“The problem is just the mood of the market,” said Peter Cardillo, chief market economist at Avalon Partners, said of Wall Street. “There is a tense feeling that there will be still more problems with the subprime situation and a fear that things are going to get worse rather than better.”

“The feeling is so bad that we did not even get much help from a drop in commodities prices,” he said. “Nothing will change until we get a positive catalyst and I don’t see one.”

Apple fell 11.61, or 7%, to 153.76.

E-Trade plunged 5.04, or 58.7%, to 3.55, while Countrywide fell 64 cents, or 4.6%, to 13.19.

Citigroup regained some strength after last week’s sell-off and was the biggest gainer among the 30 stocks that make up the Dow industrials. Citi rose 1.49, or 4.5%, to 34.58.

There was deal news that perhaps helped contain the market’s slide: International Business Machines said it will buy software developer Cognos Inc. for 5 billion, sending Cognos stock up 4.17, or 7.9%, to 57.15. IBM rose 1.20 to 101.45.

And Constellation Brands said it will pay 885 million for the US wine business of Fortune Brands. Constellation Brands dropped 39 cents to 22.60 as Fortune Brands shares rose 49 cents to 79.66.

Tyson Foods fell 42 cents, or 2.9%, to 14.33 after the world’s largest meat company forecast earnings for this year that were below what analysts were expecting.

The Russell 2000 index of smaller companies rose 5.29, or 0.68%, to 767.09.