US market down after Goldman Sachs charges

Financial shares led the stock market lower today after US federal regulators filed civil fraud charges against Goldman Sachs over its dealings in sub-prime mortgages.

The Dow Jones industrial average lost about 125 points, having been down as much as 170 points.

At times, it fell below 11,000 after closing above that level on Monday for the first time in more than eighteen months.

Analysts say the market was poised to fall after a steady run of gains the past two months, and the Goldman Sachs news gave investors a reason to sell and take some profits.

“Basically it’s sell, and ask questions later,” said Quincy Krosby, market strategist at Prudential Financial. “A market that wants to sell off will find an excuse.”

Stocks were already lower before news of the Securities and Exchange Commission’s charges against the leading investment bank. Investors were disappointed after Google reported earnings that did not live up to forecasts.

General Electric and Bank of America also reported profits that topped forecasts, but their stocks still fell.

GE’s revenue came up short of expectations, while Bank of America said loan losses remain high.

Goldman and one of its vice presidents was charged with failing to disclose key information to investors regarding complex mortgage-backed securities.

“It’s all a knee-jerk reaction to Goldman,” said Steven Goldman, chief market strategist at Weeden & Co, referring to the market’s drop. He said the fundamentals of the market have not changed.

Today’s drop comes after six straight days of gains that pushed the Dow to its highest close in more than 18 months. Stocks have been steadily rising in recent months on growing signs that the economy is recovering, albeit slowly.

According to preliminary calculations, the Dow fell 125.91, or 1.1%, to 11,018.66. The Standard & Poor’s 500 index dropped 19.54, or 1.6%, to 1,192.13, while the Nasdaq composite index fell 34.43, or 1.4%, to 2,481.26.

About five stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.8 billion shares, compared with 1.2 billion on Thursday.