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Day not so bad amid oil's plunge, trouble elsewhere
By Ellen Simon
Associated Press
Published on Saturday, Oct 25, 2008
NEW YORK: If ever a 300-point loss on Wall Street could be a good thing, it was Friday.
Wall Street started the day with a nervous eye on how far stocks would have to fall before triggering emergency trading halts. They ended the session relieved, even though the Dow Jones industrial average closed down 312, or 3.6 percent, its lowest finish since the financial crisis began six weeks ago.
Stock markets in Europe and Asia plummeted, and oil prices plunged past their lows for the last year on growing fears of a global recession. Major indexes declined more than 14 percent in Russia, and were ordered closed until Tuesday.
Dow futures — a bet, before trading opens, on where stocks would go — had plunged 550 points Friday morning, triggering a temporary trading halt.
''This is beyond volatile. It is chaotic,'' Carl Weinberg, chief economist at High Frequency Economics, wrote in a morning note to clients. ''This is the kind of day when the central banks step into the market with an 'unexpected' interest rate move to calm things down.''
Instead, it was just another day's loss, one in a series since mid-September that have erased nearly $7 trillion in value from stocks.
Before U.S. markets opened, CNBC flashed a rundown on the level of losses that would trigger trading circuit-breakers, which close the market after steep losses. The first circuit-breaker, a 90-minute halt, would kick in if the Dow lost 1,100 points before 2 p.m.
The Dow fell more than 500 points in the morning, but steadied itself, even though the only good news was the 5.5 percent increase in September existing home sales. That was tempered by median home prices, which dropped to $191,600, down 9 percent from a year ago.
The Dow closed at 8,378, its lowest finish since 8,306 on April 25, 2003. In the last six weeks, the Dow has experienced triple-digit moves in 27 of 30 trading sessions.
Broader indexes also fell more than 3 percent.
Stock investors avoided panic even as oil fell sharply, closing near $64 a barrel, despite a decision by the OPEC cartel to cut production quotas by 1.5 million barrels a day. OPEC officials, meeting in Vienna, left no doubt that they were ready to slice production again quickly if Friday's decision does not end the price free fall.
''Oil prices have witnessed a dramatic collapse — unprecedented in speed and magnitude,'' the 13-nation cartel said in a statement.
The dollar plunged below 93 yen, a 13-year low. The British pound fell 8 cents against the dollar, its largest intraday drop since 1971.
Stocks shuddered around the world. Japan's Nikkei stock average dropped 9.6 percent. Hong Kong's benchmark index fell 8.3 percent. As the U.S. market prepared to open, both Germany and France's key indexes were down 10 percent — although both narrowed their losses, with Germany's benchmark DAX index closing 5 percent lower, while France's CAC40 dropped 3.5 percent.
Markets in India, Thailand, Indonesia and the Philippines also fell as investors pulled money out of developing countries on fears they would not only be hit hard by the financial crisis but also may default on debt.
The global contraction probably will compound the U.S. economy's problems. Exports, a rare bright spot for the U.S. economy for much of this year, will surely fall as foreign countries see their currencies slump against the dollar and economies shrink.
''We don't want (emerging economies) to go down the tubes because you'll see less economic activity there and here as a result,'' said Morris Goldstein, an expert in financial crises and the International Monetary Fund at the Peterson Institute for International Economics, a Washington research institution.
The IMF announced Friday that it had reached a tentative deal for $2 billion in emergency lending to Iceland, and it's in talks with several other nations. The international lender, on the sidelines for much of this decade during the global boom, is negotiating loan packages with Hungary, Pakistan and Ukraine.
''With countries in balance of payment difficulties, the IMF has the tools to offer financing and help the situation,'' said Hung Tran, senior director of emerging markets policy at the Institute of International Finance, a global association of financial institutions. ''They're providing the short-term financing that these countries need right now.''
Friday's selling had spread on sobering economic data and weak earnings.
The U.K.'s third quarter gross domestic product fell 0.5 percent, the first decline in 16 years, putting the country on the brink of recession. Shares of Japan's Sony sank more than 14 percent when it slashed its earnings forecast for the fiscal year.
In Germany, Daimler stock dropped 11.4 percent in morning trading; it reported lower third-quarter earnings and abandoned its 2008 profit and revenue guidance.
''Periods of panic punctuated by occasional calm appears to be the manner of things for now,'' said Daragh Maher, a strategist at Calyon Corporate and Investment Bank in London.
The New York Times contributed to this report.
NEW YORK: If ever a 300-point loss on Wall Street could be a good thing, it was Friday.
Get the full article here.
Comments
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Posted 09:31 AM, 10/25/2008
The Dow will bottom-out near the 7100 level.
NASDAQ will bottom-out at the low 1300 level.
Can anyone think of any overriding good economic news which may be on the horizon? Will U.S. companies continue to degrade the U.S. economy by transitioning jobs overseas? The downward spiral seems to be unstoppable in the near term.
I took all of my funds out of stocks a couple of weeks ago, and am now very happy that I did. It is in fixed income investments earning 3% interest per year - which means it is NOT free falling by 3% per day in the stock market!
akron, oh
Posted 04:13 PM, 10/25/2008
The corporate tax rate of USA is the second highest of developed nations. No wonder corporations move elsewhere. And yes, Americans themselves are to blame for buying the imports and always expecting to pay less for more. you cannot have it both ways.
