STOCKS Panic selling ripples across globe 3:02 am, Oct 11, 2008 Tim Paradis
Wall Street extended its devastating losses Friday, but prices swung sharply as investors scooped up shares decimated by more than a week of intense and panicked selling. The Dow Jones industrials, down nearly 700 points in the opening minutes of trading, recovered to an advance of more than 100 before turning sharply lower again, only to then recover somewhat. The other major indexes fluctuated sharply as well.
The wild session on Wall St ended with its best showing of the week after investors went in search of bargains among stocks devastated by seven days of massive losses. The Nasdaq composite index finished with a modest gain, while the Dow Jones industrials lost 126 points, a relataively mild drop after the blue chips fell 2,271 during the previous eight trading days. Still, the Dow, which traded in a range of 1,019 points Friday, had its worst week ever, as did the Standard & Poor's 500 index.
The fact that traders were celebrating a 126 point loss on the Dow says a lot about the week we've had.
Frozen credit markets and a loss of confidence in the world's financial system have caused the Dow to drop 21 percent in just 10 trading days. The blue chip index tumbled 678 points Thursday, and is heading to its worst weekly point drop, and one of its biggest weekly percentage drops, since being created 112 years ago.
Friday's gyrations were likely exacerbated by the computer-driven "buy" orders that kicked in when prices fell far enough to make some stocks -- including the pummeled financial stocks -- look like attractive bets. But that buying didn't necessarily reflect an easing of the market's deep despair, and so the selling continued.
"I think everyone has just said 'Enough is enough,'" said Steven Goldman, chief market strategist with Weeden & Co. "We got to within 60 points of the 2002 low. This has become a trader's market, and a snapback rally in the middle of the day is an example of this."
The Dow's low in Wall Street's last bear market was 7,286.27, reached Oct. 9, 2002. The blue chips sank as low as 7,882.51 on Friday.
At the start of Friday's session, losses for the year totaled a staggering $8.3 trillion, as measured by the Dow Jones Wilshire 5000 Composite Index, which tracks 5,000 U.S.-based companies representing almost all stocks traded in the U.S.
A stream of selling forced exchanges in Austria, Russia and Indonesia to suspend trading, and those that remained opened were hammered. The rout in Australian markets caused traders there to call it "Black Friday."
European stocks sank, with Britain's FTSE-100 down 8.85 percent, German's DAX down 7.1 percent, and France's CAC-40 down 7.7 percent. In Asia, the collapse of Japan's Yamato Life Insurance caused already nervous investors to pull even more money out of the market -- the Nikkei 225 fell 9.6 percent.
In late morning trading, the Dow fell more than 400 points, or 5 percent, to 8,144.
Broader stock indicators also fell. The Standard & Poor's 500 index declined 38.15, or 4.19 percent, to 871.77, while the Nasdaq composite index fell 51.57, or 3.13 percent, 1,593.55.
Declining issues outnumbered advancers by about 6 to 1 on the New York Stock Exchange, where volume came to 754.1 million shares.
Jack Ablin, chief investment officer at Harris Private Bank, said some investors are fearful of placing bets before the market shakes out for fear they will exacerbate their losses.
"You don't want to get hit by a train," he said. "This is now about market psychology. There's extreme fear and panic out there."
Investors continue to shift money into safer investments, most of it going into the government bond market. The yield on the three-month Treasury bill plunged to 0.40 percent from 0.58 percent late Thursday. That suggests that demand for T-bills, regarded by investors as the safest assets around, remains high.
Longer-term Treasury yields moved higher as investors moved into shorter term issues. The yield on the benchmark 10-year note rose to 3.87 percent from 3.76 percent late Thursday.
Central banks around the world were forced to cut interest rates this week after continuing problems in the credit market triggered concerns that banks will run out of money. Analysts have described the mood on trading floors as panicked, with investors bailing out of stocks on fears there is no end in sight to the financial carnage.
Gold prices climbed $10.60 to $897.10 an ounce on the New York Mercantile Exchange, while oil prices fell. A barrel of light, sweet crude declined $3.60 to $82.99 a barrel on the Nymex.
President Bush said Friday the government's efforts to rescue the financial sector was powerful enough to succeed but that it would take some time to be fully implemented.
His remarks came as finance ministers and central bankers from the Group of Seven nations gathered Friday in Washington to discuss the economic meltdown. One of the potential remedies expected to be reviewed at the meeting is for governments to guarantee lending between banks.
Prospects of further government help and, perhaps, attractive prices helped the financial sector show some signs of life Friday. Big national banks were among the gainers, including Bank of America Corp., which rose $1.14, or 5.8 percent, to $20.77. Some smaller banks also rose, including Fifth Third Bank Corp., which rose 19 cents, or 2 percent, to $9.92.
Citigroup Inc. said late Thursday it was suspending its bid to acquire Wachovia Corp., which will be acquired by Wells Fargo & Co. Citigroup rose 57 cents, or 4.4 percent, to $13.50, while Wells Fargo jumped 65 cents, or 2.4 percent, to $27.90. Wachovia surged $1.25, or 35 percent, to $4.85.
General Electric Co., a bellwether for the U.S. economy and a company with a large financial operation, reported that its third-quarter earnings sank 22 percent. The conglomerate, one of the 30 companies that make up the Dow industrials, blamed the drop on more losses in its financing business, though earnings for the company met Wall Street projections. GE rose 19 cents, or 1 percent, to $19.20.
Energy stocks fell sharply again Friday after leading the market lower Thursday. The drop in oil and tightness in credit fed investors' worries about the sector. Exxon Mobil Corp. fell $6.74, or 9.9 percent, to $61.26, while Chevron Corp. fell $5.21, or 8.1 percent, to $58.79.
Wall Street also digested fresh economic data. The U.S. trade deficit edged down slightly in August, reflecting a drop in foreign oil from record levels. But the politically sensitive deficit with China increased as imports from that country hit an all-time high.
The Russell 2000 index of smaller companies fell 13.74, or 2.75 percent, to 485.46.
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