Published: Wednesday October 22, 2008
Dimming confidence in the corporate sector sent stocks sharply lower yesterday as investors digested a discouraging batch of earnings and a new initiative from the US central bank, the Federal Reserve, to shore up money-market mutual funds.
The Dow Jones industrials closed down 231.77 points or 2.5 per cent to 9,033.66 after Caterpillar and DuPont, two members of the blue-chip index, said their earnings declined in the third quarter and suggested a bleak outlook for the economy. Caterpillar, a top maker of earthmoving equipment, called the current situation “the worst in years.”
Policymakers and economists have warned that the economy is in for a rough ride over the next few months as the credit crisis hurts businesses and consumer demand. The job market is expected to weaken further and the housing slump has shown no signs of improvement.
In the credit markets, however, signs of improvement continued to appear. Borrowing rates between banks dropped again, a crucial show of confidence among financial institutions. The benchmark rate for overnight interbank loans, known as Libor, dropped to its lowest level in more than a month, a significant improvement from just a few days ago when it neared its historical highs.
But stock investors seemed more focused on earnings, including a report that the billionaire investor Kirk Kerkorian had started to sell his stake in Ford, the motor giant. Kerkorian said his investment company, Tracinda, sold 7.3 million shares of Ford stock on Monday at a huge loss, and intended to further reduce its remaining 6.1 per cent stake. The move underscored the weakening state of Ford and its two Detroit rivals, General Motors and Chrysler, which are in merger talks.
The broader Standard & Poor’s 500-stock index lost 3 per cent or 30.35 points to 955.05 and the Nasdaq composite dropped 4.1 per cent or 73.35 points, to 1,696.68. Technology stocks led the declines, a day after Texas Instruments said sales would fall short of expectations. Texas Instruments shares declined 6.2 per cent.
Shares of Ford fell 7.7 per cent. Caterpillar stock dropped 2 per cent and DuPont was off by 7.9 per cent.
Investors were also expected to sell shares in order to lock in some gains from Monday’s 413-point rally in the Dow.
European stocks ended mixed, turning mostly lower in the afternoon a day after France announced a big injection of cash into French banks.
Under the plan announced late Monday by the French finance minister, Christine Lagarde, the government will buy 10.5 billion euros, or about US$14 billion, of subordinated debt from six major lenders in exchange for a pledge that they will increase lending to businesses and consumers.
Shares in London and Frankfurt fell more than 1 per cent. Paris stocks rose 0.8 per cent. The Tokyo benchmark Nikkei 225 stock average rose 3.3 per cent, powered by a big day on Monday and continued easing in the credit market. The main Sydney market index, the S&P/ASX 200, rose 3.9 per cent. In Hong Kong, the Hang Seng fell 1.8 per cent.
Source: Trinidad Guardian Newspapers
http://www.guardian.co.tt/business1.html
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