Fears are confirmed as stocks keep falling

Adding to mortgage and credit unease, the yen rose to a one-year high against the dollar.

NEW YORK (AP) — U.S. stocks appeared headed for another sharp retrenchment Thursday as a move by Countrywide Financial Corp. confirmed fears of widening problems with some mortgages and tighter access to credit.

A sell-off overseas offered Wall Street little reason to try to stanch the bleeding early Thursday a day after the Dow Jones industrial average closed below the 13,000 mark for the first time since April and the Standard & Poor’s 500 index moved into negative territory for the year.

Investors’ confidence took a drubbing Wednesday on concerns about potential trouble at Countrywide, the nation’s largest mortgage lender, and KKR Financial Holdings LLC. Countrywide, referring again to tightening credit conditions, said early Thursday it was forced to draw on an $11.5 billion credit line to fund operations.

In premarket electronic trading, Countrywide recently changed hands at $17.50, down $3.79, or 17.8 percent, from its close of $21.29 Wednesday.

Falling futures

Adding to unease, the yen rose to a one-year high against the dollar, stirring concern that some investors were getting out of a trading strategy referred to as the yen carry trade — using the Japanese currency to acquire higher-yielding assets elsewhere.

Dow futures expiring in September fell 160, or 1.24 percent, to 12,761, while S&P 500 futures dropped 17.00, or 1.2 percent, to 1,397.40. Nasdaq 100 index futures fell 19.50, or 1.04 percent, to 1,859.00.

Overseas, Britain’s FTSE 100 fell 3.08 percent, Germany’s DAX index fell 2.47 percent, and France’s CAC-40 fell 3.13 percent. In Asia, Japan’s Nikkei stock average fell 2 percent. Hong Kong’s Hang Seng Index fell 3.3 percent, while the often-volatile Shanghai Composite Exchange fell 2.1 percent.

Further weighing on investor sentiment, St. Louis Federal Reserve President William Poole told Bloomberg Television after the closing bell Wednesday it wasn’t necessary for the central bank to consider lowering short-term interest rates before the regularly scheduled meeting of its rate-setting committee next month.

Housing concerns will remain in focus Thursday with a report due on July housing starts. Starts are expected to rise by a slightly smaller amount than in June, and data on building permits are expected to show an increase by about the same amount.

Investors will also get a reading from the Philadelphia Federal Reserve on regional manufacturing for August.

Early Thursday, bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.65 percent from 4.72 percent late Wednesday. Bond prices move opposite yields. The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude fell $1.55 to $71.78 per barrel in premarket electronic trading on the New York Mercantile Exchange, giving back Wednesday’s gains as storms brewing in the Caribbean didn’t appear to pose a threat to energy operations.