×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Stocks tumble as Street worries about financials

Stocks tumble as Street worries about financials
AP
Comment E-mail Print Share
First Published: Wed, Oct 08 2008. 10 02 AM IST
Updated: Wed, Oct 08 2008. 10 02 AM IST
New York: The misery worsened on Wall Street on Tuesday, with stocks piling on losses late in the session and bringing the two-day decline in the Dow Jones industrials to more than 875 points amid escalating worries about credit markets and the financial sector.
The Dow lost more than 500 points and all the major indexes slid more than 5%. The Standard & Poor’s 500 index saw its first close below 1,000 in five years.
Steps by the Federal Reserve to reinvigorate the dormant credit markets ultimately weren’t enough to calm nervous investors. News about financial companies only added to their despondent mood.
“The calls I’m getting - every money manager I deal with, and every client I talk to just very emotional. This is a very, very emotional time, and most of them are taking steps to shore up their defenses, reducing exposure to stocks just to defend their portfolios,” said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors.
The magnitude of the stock market’s plunge is reflected in the Dow’s grim stats:
* Tuesday’s close was its lowest close in five years, since 30 September, 2003.
* In just five trading days this month, and in the fourth quarter, it is down about 1,400 points, or 13%.
* It has fallen 33.3% since its record close of 14,164.53, a year ago Thursday.
Through Tuesday, it suffered its largest five-day point decline ever, and its largest five-day percentage drop since the 11 September , 2001, terror attacks.
The Dow’s percentage loss Tuesday was 5.11%, actually a better performance than the 5.74% suffered by the S&P, the market indicator most watched by traders and analysts. The Nasdaq composite dropped 5.8%.
The market’s paper loss for the session came to about $700 billion, as measured by the Dow Jones Wilshire 5000 Composite Index, which tracks 5,000 US-based companies’ stocks. So far this month, the loss has come to about $2.2 trillion.
Federal Reserve Chairman Ben Bernanke warned in a speech Tuesday that the financial crisis could prolong the difficulty the economy is facing. While his remarks were widely regarded as a sign that an interest rate cut could be in the offing, Wall Street appeared little comforted and focused on his downbeat assessment.
Earlier, the Fed announced plans to buy massive amounts of corporate debt to jump-start lending in the markets where many companies turn for short-term loans called commercial paper. The evaporation of faith that loans will be repaid has lenders weary and is making it more difficult and expensive for businesses and consumers to borrow.
The credit markets did show some slight signs of easing as demand for safe-haven investments decreased, though that offered little comfort to investors highly anxious about the extremely low lending levels and their impact on the economy. The markets seized up last month after Lehman Brothers Holdings Inc. filed for bankruptcy and the government stepped in to rescue insurer American International Group Inc.
The Fed’s latest move to lubricate the credit markets stops short of a broad interest rate reduction that some investors say is necessary to restore confidence in the market. Other market watchers argue, however, that more focused steps like Fed’s decision to buy commercial paper are what’s needed.
Investors remain worried about financial companies like Bank of America Corp., which fell after slashing its dividend and reporting that its third-quarter profit fell 68%. The stock fell $8.45, or 26%, to $23.77 Tuesday. It was by far the steepest decliner among the 30 stocks that comprise the Dow industrials.
Stocks ended lower for the fifth straight session. The Dow fell 508.39, or 5.11%, to 9,447.11. The drop came a day after the blue chips fell below 10,000 for the first time in four years. The Dow skidded as much as 800 points on Monday before finishing with a loss of 370.
Comment E-mail Print Share
First Published: Wed, Oct 08 2008. 10 02 AM IST