US shares saw their biggest drops in more than four months as investors dealt with disappointing earning reports and rising concerns about the mortgage market. The Dow Jones Industrial Average weakened by 226.47 points to 13716.95. Twenty-nine of the 30 Dow components fell, only Verizon Communications reported a gain. DuPont was the Dow’s biggest loser. The chemical maker reported flat second-quarter profit as improving sales abroad balanced the ongoing weakness in the U.S. housing and automotive markets. Other stock indicators also suffered as the Standard & Poor’s 500-stock index lost 30.53 to 1511.04 and NASDAQ closed down 1.89% at 2,639.86 points. US dollar slipped to its all time low and the yen hit a two-month high overnight on persistent worries over U.S. subprime mortgage problems. The euro reached $1.3853 against the dollar, surpassing its previous high of $1.3846. The retreat is not surprising because the market’s recent rally to record 14,000 came before companies began reporting quarterly results. After the Dow’s move to 14,000, market seeks new profit making venture, to maintain the constant growth. Earlier, European shares had also seen heavy losses in the main markets like London, Paris and Frankfurt, as all lost more than 1.5 percent. It had warned earlier that it was struggling as thousands of its sub-prime borrowers battled with debt. In what is perhaps a signal to Wall Street of more woes to come in the mortgage lending market, Countrywide Financial posted sharply lower second-quarter profit and slashed its earnings forecast as mortgage banking earnings were cut in half. Its shares fell $3.56, or 10.5 percent, to $30.50. As the largest U.S. mortgage lender, Countrywide is used as one of the barometers of the housing industry, which has continued to slump amid delinquencies and defaults in subprime loans, or those made to borrowers with weak credit. The deteriorating sub-prime mortgage problems have upset Wall Street this year. The market has generally recovered, but resent dip indicates that mortgage market remains vulnerable.
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