Wednesday, October 8, 2008

Market sheds US$2.2 trillion in October - Dow falls 508 points Tuesday

Published: Wednesday October 8, 2008

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 five per cent.

The Standard & Poor's 500 index saw its first close below 1,000 in five years.

Despondent mood

Steps by the Federal Reserve to reinvigorate the dormant credit markets ultimately were not 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 - are 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 September 30, 2003.

In just five trading days this month, and in the fourth quarter, it is down about 1,400 points, or 13 per cent.

It has fallen 33.3 per cent 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 September 11, 2001, terror attacks.
Paper loss

The Dow's percentage loss Tuesday was 5.11 per cent, actually a better performance than the 5.74 per cent suffered by the S&P, the market indicator most watched by traders and analysts.

The Nasdaq composite dropped 5.8 per cent. The market's paper loss for the session came to about US$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 US$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.

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 per cent.

The stock fell $8.45, or 26 per cent, to $23.77 Tuesday. It was by far the steepest decliner among the 30 stocks that comprise the Dow industrials.

Rumour

And a rumour that Mitsubishi UFJ Financial Group Inc. was pulling out of a deal to acquire up to 24.9 per cent of the voting shares of Morgan Stanley sent the investment bank's stock tumbling $5.85, or 25 per cent, to $17.65.

The companies denied the rumour, but the Street was panicky enough that it still sent Morgan Stanley and other financials tumbling.

Investors are fearful that financial companies will continue to face cash shortages even with efforts in Washington and by other governments to resuscitate lending.

"It's such a widespread loss of confidence and, to some extent, a race for the exits," Johnson said.

Stocks ended lower for the fifth straight session. The Dow fell 508.39, or 5.11 per cent, 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.

Broader indexes also fell. The S&P 500 index declined 60.66, or 5.74 per cent, to 996.23, the first close below the 1,000 mark since September 2003. The Nasdaq composite index fell 108.08, or 5.80 per cent, to 1,754.88.

Currencies

The dollar was mostly lower against other major currencies, while gold prices rose.

Oil prices rebounded after plunging Monday to an eight-month low on concerns a global recession will undermine demand for crude. Light, sweet crude rose US$2.25 to settle at $90.06 a barrel on the New York Mercantile Exchange.

About 2,800 stocks declined on the New York Stock Exchange, while fewer than 400 advanced.

Consolidated volume came to 6.84 billion shares, compared with 7.81 billion shares traded Monday.


Source: Jamaica Gleaner Newspapers
http://www.jamaica-gleaner.com/gleaner/20081008/business/business7.html

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