U.S. Market plunges, U.S. Dollar extends losses

Fri Jul 11, 2008

NEW YORK - Stocks tumbled Friday as investors focused on troubles at
mortgage companies Fannie Mae and Freddie Mac and watched oil prices
climb further into record territory. The Dow Jones industrials fell more
than 170 points and neared the 11,000 mark for the first time in two
years.

Investors seemed unimpressed by a statement from Treasury Secretary
Henry Paulson, who said the government's focus is ensuring that Fannie
Mae and Freddie Mac remain as presently constituted to carry out their
mission.

The government-chartered companies at times each lost more than 40
percent on growing speculation that a government bailout is needed. A
collapse of the two financiers would cause further shock to the financial
system, and trigger more losses to banks and brokerages with
significant holdings of mortgage-backed securities.

Global banks and brokerages have scrambled to sell assets and raise
capital in an effort to offset nearly $300 billion of write-downs linked
to the credit crisis.

Citigroup Inc. announced Friday it will sell its German retail banking
operation to France's Credit Mutuel for $7.7 billion.

Meanwhile, oil continued its ascent on supply concerns. A barrel of oil
vaulted to a record above $147.

The confluence of negative news offset a mostly positive quarterly
report from General Electric Co. The conglomerate that owns
everything from television network NBC to jet engine plants reported
second-quarter profits that met analysts' expectations. However, the
outlook across its business lines was mixed.

In midmorning trading, the Dow fell 173.83, or 1.55 percent, to 11,055.19.
It last traded below 11,000 on July 25, 2006.

Broader stock indicators also lost ground. The Standard & Poor's 500
index fell 19.58, or 1.56 percent, to 1,233.81, and the Nasdaq composite
index fell 33.03, or 1.46 percent, to 2,224.82.

Light, sweet crude rose $5.08 to $146.73 per barrel on the New York
Mercantile Exchange. Behind the rise are concerns about a disruption
to tight global supplies amid tensions over Iran's launch of test missiles
and the possible renewal of oil-related violence in Nigeria.

Bond prices fell. The yield on the benchmark 10-year Treasury note,
which moves opposite its price, rose to 3.83 percent from 3.80 percent
late Thursday. The dollar was mixed against other major currencies,
while gold prices rose.


U.S. Dollar extends losses

LONDON - The dollar was weighed by news that the U.S. government
may have to step in to salvage troubled mortgage lenders Fannie Mae
and Freddie Mac with state ownership.

After doubts emerged this week about the capitalization needs of the two
government sponsored bodies, the news that the government may
intervene to return the two companies to public ownership made markets
nervous.

"Traders may look to further limit any exposure to the dollar as we move
into the weekend break," particularly ahead of economic data later today,
said James Hughes at CMC Markets.


NEW YORK, July 11 (Reuters) - The dollar extended losses versus the euro and yen on Friday, as the U.S. stock market opened sharply lower and investors continued to fret about the widening impact of the credit crisis.

The euro rose to $1.5940, the highest since April 23, according to Reuters data. The dollar slipped below 106 yen to 105.74, down 1.2 percent on the day.

"Unlike the turmoil of a year ago, which was accompanied by a rise in the dollar as carry trades unwound, today's turmoil is solely triggered by U.S.-specific events," said Ashraf Laidi, chief market analyst at CMC Markets in New York.

He said the Federal Reserve may have to consider cutting interest rates again, which would likely push the euro above $1.60.

U.S. stocks opened, with the major indexes .DJI .SPX .IXIC down more 1.5 percent on the day.

(Reporting by Gertrude Chavez-Dreyfuss and Steven C. Johnson; Editing by James Dalgleish)