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Friday, October 10, 2008 10:41 AM Wall Street continues fall this morning By Tim Pradis and Martin Crutsinger | AP Business Writers NEW YORK -- A stampede of selling that began in the waning minutes of trading on Wall Street Thursday spread to Asia and back to Wall Street this morning, deepening a financial crisis that has defied all efforts to stop it. Thursday's anniversary of the stock market peak turned into one of the worst days in Wall Street history, with the Dow Jones industrials loosing a breathtaking 679 points. U.S. stocks lost more than 7 percent, $872 billion of investments evaporated, and the Dow fell to 8,579. This morning, the Dow had fallen another 250 points as of 9:50 a.m., and at one point in the morning had fallen below 8,000 before climbing back above that mark. President Bush was scheduled to make a statement to the nation about the economic crisis at about 10:30 this morning. As the market continues to drop, Wilson economist John Bethune said it will have an impact on the local economy. Apart from the investment losses that many Wilsonians have suffered, the drop in the stock market will impact spending which then could affect manufacturing, said John Bethune, dean of the School of Business at Barton College. "It's obviously going to have impacts on people's spending because they derive income from the stock market in dividends, and a lot of those dividends have been cut," Bethune said. "And also, if people see their wealth go down they naturally get cautious and retrench and stop spending, and then it could hurt manufacturing in Wilson County. If people aren't buying things, we won't have to make things." Bethune said he doesn't like to give stock market advice, but did say that with stock prices down, selling doesn't seem to have much of an upside right now in his viewpoint. "You're just locking in your losses at this point and you might miss the turnaround when the market begins to recover which hopefully will be sooner rather than later," he said. As bad as the day was Thursday, even worse has been the cumulative effect of a historic run of declines: The Dow suffered a triple-digit loss for the sixth day in a row, a first, and the average dropped for the seventh day in a row, a losing streak not seen since 2002. "Right now the market is just panicked," said David Wyss, chief economist at Standard & Poor's in New York. "Nobody wants to take on any risk. Everybody just wants to get their money and put it under the mattress." The panic quickly spread overseas, where Asian stock markets plummeted today. Japan's benchmark Nikkei 225 index shed more than 10 percent, Hong Kong's Hang Seng index lost more than 8 percent, South Korea's Kospi fell 7.4 percent, Shanghai's benchmark gave up 4.1 percent, and Singapore's Straits Times index was down 7.0 percent. In Syndey, Australia's S&P/ASX200 was down 6.8 percent. Thursday's sell-off on Wall Street took place one year to the day after the Dow closed at its record high of 14,164. Since that day, frozen credit, record foreclosures, cascading job losses and outright fear have seized the market and sapped 39 percent of its value. Paper losses for the year add up to an staggering $8.3 trillion, according to preliminary figures measured by the Dow Jones Wilshire 5000 Composite Index, which tracks 5,000 U.S.-based companies representing almost all stocks traded in America. It was the second straight day that Wall Street was rocked by a final-hour sell-off, but this one was particularly shocking. Most of the day was relatively calm, and the trading floor was quieter than usual because of the Jewish holiday of Yom Kippur. Wall Street awoke to news the federal government was brandishing a new weapon against the financial crisis -- considering seeking an equity stake in major U.S. banks in order to stabilize them. But that step appeared to be as ineffectual as the others Washington has rolled out in recent weeks, including a $700 billion bailout of the financial industry, a coordinated interest rate cut by central banks around the world and direct lending by the Federal Reserve to private companies to provide them with short-term cash. Acquiring a stake in the banks would be yet another startling intervention by the government in the free market, but economists said President Bush was left with little choice because of the credit markets, where tight lending has choked off the everyday cash that is the lifeblood of the economy. "In normal times, this would be out of the question, but in the present dire situation, I think the government should be employing all the powers that it can," said Sung Won Sohn, an economics professor at California State University, Channel Islands. Wall Street has been teetering on the brink of panic for a month now, vulnerable to any bad news. Thursday's sell-off was triggered when a major credit rating agency put General Motors Corp. and its finance affiliate under review to determine whether it should be downgraded. Stock in GM, one of the 30 components of the Dow Jones industrials, lost 31 percent of its value and closed at $4.76 -- its lowest level since the Korean War began more than a half century ago. For the Dow, it has been nothing short of a free fall: * The average is down 2,338 points, or 21 percent, in the last four weeks, since the Lehman Brothers bankruptcy escalated a long-running credit crunch into a full-fledged crisis. * The point decline Thursday was the third-worst in Dow history. The worst, 778 points, came less than two weeks ago. * Of the last 19 trading days, there have been 11 triple-digit losses -- including the unprecedented six straight. The six gains have all been triple-digits, and only one of them was enough to make up the losses of the day before. * The Dow now stands only about 1,300 points above its lowest close of the bear market that followed 9/11. In a market as volatile as this, that gap can be closed in a couple of trading days, or less. In fact, triple-digit declines can happen almost in an instant. On Thursday, the Dow was above 9,200 after 1:30 p.m. and still above 9,000 after 3 p.m. The pressure to sell was so intense that the Dow kept dropping precipitously for 10 minutes after the 4 p.m. closing bell as the day's losses were tabulated. In percentage terms, the drop in the Dow exceeded the day the markets reopened after the Sept. 11, 2001, terrorist attacks. It was not close to the 22.6-percent decline on Black Monday in 1987, the last stock market crash. Still, it is becoming increasingly clear that Washington has ever fewer places to reach in its toolbox to stop, or perhaps even slow, the crisis. Among the options still left are buying up foreclosed properties and making direct loans to homeowners, both of them hard for free-market supporters to swallow. Speaking in the afternoon before the market closed, President Bush told an audience on the South Lawn of the White House that the economy was going through a "very touch stretch." But, he said: "I'm confident in our economy's long-term prospects." After the market closed, the White House said Americans should remain confident despite the market plunge, and President Bush planned to speak from the Rose Garden on Friday morning -- though he was not expected to unveil any new policy proposals. "The Treasury Department is moving quickly to use new tools to improve liquidity, which is the root cause of this problem," White House press secretary Dana Perino said. "Americans should be confident that every effort is being taken to stabilize our markets." |
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