Snowballing sell-off drives market down 679 points
10/10/2008 12:00 AM
10/09/2008 11:37 PM
Fear and foreboding took hold on Wall Street Thursday, as the stock market again plunged and investors grew convinced the nation is on the verge of a deep and prolonged recession. The rout continued in Japan, where stocks plummeted in early trading.
The government took steps toward an extraordinary public investment in U.S. banks and General Motors stock fell to its lowest price since 1950 on fears it won't weather the downturn. Share prices fell across every industry and for each of the 30 stocks in the Dow Jones industrial average, which was down 679 points, or 7.3 percent.
But the plummet could not be blamed on any single bit of horrible news – there were no new bank failures, government bailouts or corporate bankruptcies.
“I've never seen a panic like this,” said David Wyss, chief economist at Standard & Poor's.
The broad Standard & Poor's 500 fell 7.6 percent, the seventh straight day of misery on Wall Street. The index has now fallen 42 percent from its all-time high a year ago Thursday and 22 percent this month alone. Stocks are on track for their worst calendar year since 1937.
Asian markets were dramatically lower in early trading. Japan's benchmark Nikkei average plunged nearly 10 percent, Australia markets slid more than 7 percent, and South Korea stocks were down about 8 percent.
“It's a domino effect. Stocks are falling out of bed. There is distrust in the market and distrust in the government that is trying to heal this,” said Peter Cardillo, chief market economist with New York-based Avalon Partners.
Investors pulled a record $72 billion out of stock and bond mutual funds in September, the research firm TrimTabs said Thursday, and in the past week alone took out $52 billion.
Continuing its efforts to stanch the damage, the Bush administration Thursday said it is working on a plan to inject government cash into some of the nation's troubled banks. It may brief congressional leaders as early as Friday. Meanwhile, global economic policymakers gather in Washington on Friday for the International Monetary Fund and World Bank annual meetings, and will try to find coordinated responses.
President Bush, who has said little publicly during this week's prolonged market dive, will make a statement this morning in the Rose Garden, the White House said Thursday. He also will take the unusual step of meeting with finance ministers from the Group of Seven industrialized countries Saturday.
Press secretary Dana Perino said Bush would “assure the American people that they should be confident that economic officials are aggressively taking every action to stabilize our financial system.”
While the stock market was the most visible sign of the distress, a more significant one may have been a rise in interest rates for short-term lending among banks. The spike came despite Wednesday's cut in the target interest rate of the world's major central banks, suggesting banks are more fearful than ever of lending to each other.
Credit markets provided modest good news, as the interest rates dropped on commercial paper, debt that companies use to finance short-term cash flow. The Federal Reserve announced a program to take on that debt Tuesday morning.
Investors have become frustrated that the government's efforts to tackle the financial crisis, including plans to buy up billions in toxic mortgage debt and a global interest rate cut, have yet to loosen the credit markets.
“Everyone applauds (the government efforts). The fearful part is that nothing has taken hold,” said Bart Barnett, head of equity trading at Morgan Keegan, based in Memphis. “None of it seems to stop the free fall in the market.”
Join the Discussion
Charlotte Observer is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.