3/15/2007: Subprime Mortgages Roil Financial Stocks
The S&P 500 experienced another significant decline on Tuesday (3/12), losing 2%, although it recouped a third of the loss on Wednesday. Jitters over subprime mortgages continue to weigh on the market. On Tuesday morning, the Mortgage Bankers Association reported that mortgage delinquencies reached 4.95%, a 4-year high, and subprime mortgage delinquencies increased to 13.33%. Not surprisingly, financial stocks have taken the largest hit since the downturn. Since February 26, the financial sector of the S&P 500 has fallen 5.8%, compared to the 4.3% decline for the S&P 500. Year-to-date, financial stocks are 5.4% underwater. Of course, several subprime originators, like New Century Financial (which was not in the S&P 500), have experienced catastrophic losses. Larger institutions are also getting knocked around. Countrywide Financial, one of the largest mortgage lenders, has fallen 24% from its February high. Investment banks are also feeling the heat. Lehman Brothers is 16% off its February high and Goldman Sachs is 9% lower.