The Unraveling in Small Turns

Hal Weitzman reports from New York:

Countrywide, the beleaguered mortgage group, prompted an early plunge in stocks by saying it would have to draw on $11.5bn of credit and an official reports showed new homebuilding dropped to a 10-year low while building permits were at an 11-year low in July.

. . . “While Fed officials are proceeding as if the calamity has yet to occur, it would appear that some in the market believe the calamity is simply yet to be fully appreciated,” said analysts at Interactive Brokers.

. . . Nerves were not soothed by the Federal Reserve pumping more liquidity into the system on Thursday morning. The New York Fed announced an overnight repurchase agreement worth $12bn and a 14-day repurchase worth $5bn, while signalling that it expected to make similar repurchases on a more regular basis over the coming days.

. . . An hour before the opening bell, the Commerce Department released a gloomy report on US housing starts, showing that construction of new homes last month dropped to its lowest level in 10 years. The figures underlined the woes that have beset the homebuilding and mortgage sectors in recent weeks.