U.S. stocks broadly fell Tuesday after a report that Pacific Investment Management Co., BlackRock and Federal Reserve Bank of New York are attempting to force Bank of America to repurchase soured mortgages packaged by Countrywide Financial Group.

The Dow Jones Industrial Average recently dropped 202 points to 10942, plunging through 11000. The blue chip index had been down more than 100 points earlier in the session, but the losses accelerated after Bloomberg reported the names of the bondholders seeking to force Bank of America to buy back $47 billion in bad mortgages.

The Wall Street Journal reported earlier Tuesday that a group of institutional bond investors are stepping up efforts to recoup losses on soured mortgage portfolios at Bank of America. BlackRock is the world's largest money manager and Pimco runs the biggest bond fund.

The New York Fed said in August it would demand banks take back mortgages sitting in some mortgage backed securities it owns. The New York Fed came to own the securities through its rescues of Bear Stearns and American International Group. Bloomberg said the New York Fed is one investor listed in the letter.

The Standard & Poor's 500-stock index fell 22 points to 1163 and the technology heavy Nasdaq Composite dropped 51 to 2430. The S&P 500 financial sector erased earlier gains and was recently down 1.1%.

Bank of America shares were recently down 32 cents, or 2.6%, at $12.01. Earlier Tuesday, the bank said its third quarter loss widened, though its adjusted results topped analysts' views, as the bank wrote off $10.4 billion related to its credit card unit.

Stocks earlier were down after China's sudden rate hike and a barrage of corporate earnings that disappointed investors. China's central bank raised interest rates for the first time in nearly three years, as the Beijing government attempts to contain inflation and soaring property prices. The People's Bank of China said it will raise its benchmark one year lending and deposit rate by a quarter of a percentage point. The move boosted the dollar but hurt commodities and equities.

A heavy dose of corporate earnings also prompted a mixed reaction among investors, who nitpicked impressive quarters by technology giants Apple and IBM. For Apple, iPad sales fell short of expectations and the company offered a conservative forecast for the current quarter, which drove the stock down 1.9% after hitting an all-time high Monday. IBM posted better than expected earnings and boosted to its full year guidance. But the stock dropped 3.1% and was the Dow's worst performer. Still, IBM had hit an all time high on Monday and remains up 2% this month and 5.4% over the past three months.

European market

European stock markets finished lower Tuesday, led by resource stocks, which dropped after a surprise rate hike by China.Tech stocks and U.S. earnings news also weighed on sentiment.

The Europe Stoxx 600 index fell 0.5% to end at 265.24. Losses picked up as U.S. stock markets opened in the red, dragged down by disappointment over earnings from Apple Inc. and International Business Machines.

News of a 0.3% rise in U.S. housing starts in September, stronger than economists expected and the highest level since April, did little to stem the selling. Also weighing was a quarter-point hike in China's deposit and lending rates that was not expected until early next year. In London, miners such as Xstrata PLC fell 4.4%. Earlier in the day the company reported a fall in coal output.

Fresnillo PLC slid 5.3%, Vedanta Resources PLC lost 3.5% and Rio Tinto dropped 3.2%. The FTSE 100 index fell 0.7% to 5,703.89. In Paris, the CAC 40 index fell 0.7% to 3,807.17, with shares of oil major Total SA off 1.7% and tech stocks also weak, with Capgemini down 2.1% and Alcatel Lucent off 3.5%.

Some banks stuck to gains, amid a wave of U.S. earnings from companies including Goldman Sachs Group and Bank of America. In Germany, Deutsche Bank rose 1.8% and Commerzbank was up 1.1%. Weighing on the downside in Germany, Infineon Technologies AG fell 1.9% and SAP AG lost 1.1%. The German DAX 30 index ended down 0.4% at 6,490.69.

Asian market

Asian equity markets ended mostly higher Tuesday, with rare-earths plays climbing in China and Australia, while South Korean and Taiwanese technology stocks declined on Apple's weaker than expected iPad sales.

Japan's Nikkei Stock Average gained 0.4%, but South Korea's Kospi fell 1.0% and Taiwan's Taiex shed 0.2%. Hong Kong's Hang Seng Index tacked on 1.3% and the Shanghai Composite Index gained 1.6%.

Many metals and rare earth firms rose after the China Daily cited an unnamed official at the Ministry of Commerce as saying the country will reduce quotas for rare earth exports by as much as 30% in the first half of next year to protect the metals from overexploitation. The official said China's reserves of medium and heavy rare earths might run out within 15 to 20 years at the current rate of production.

In China, Inner Mongolia Baotou Steel Rare Earth Group rose 1.3% and Minmetals Development ended up 1.5%. Among other metals plays, Jiangxi Copper's Shanghai-listed shares jumped 8.1% while its Hong Kong listed ones gained 6.3%.

Base metals

Base metals closed lower on the London Metal Exchange Tuesday after an unexpected rate increase by China's central bank propelled the U.S. dollar higher and sent commodities tumbling.

LME three month copper hit an intraday low of $8,199/ton. It recovered marginally heading into the PM kerb close, however, and ended the day down 2.2% at $8,260/ton. Meir tipped the benchmark LME three month copper contract to find support at $8,043/ton.

Crude oil futures plunged through $80 a barrel Tuesday after China's surprise move to raise interest rates sent the dollar higher and sparked worries that demand for raw materials could slow.

Light, sweet crude oil for November delivery settled $3.58, or 4.3%, lower at $79.50 a barrel on the New York Mercantile Exchange, the largest front month percentage decline since February. The November contract expires Wednesday and trading was concentrated in the December contract, which fell $3.52 to $80.28 a barrel.

Brent crude oil on the ICE futures exchange settled $3.27 lower at $81.10 a barrel. China's shock rate hike sent gold prices tumbling as investors fled the precious metal market for the perceived safety of cash. The most actively traded gold contract, for December delivery, settled down $36.10, or 2.6%, at $1,336.00 per troy ounce on the Comex division of the New York Mercantile Exchange.

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