Dow drops some 700 points, worst in 6 years

[Rural Surin]

Getting that news out of the States this morning. Another, in a recent series, of minor crashes. An added news note I pick up on this mornimg - the huge number of companies and business of every sort in the States are closing their doors or closing franchised locations. Not just a few. This is expansive. These closures and cutting-back measures really began in earnest some month ago. And today, the US Congress has decided to delay and shelf any decisions or debate towards the US auto makers "loan". The unemployment rate is fast approaching record highs, as people are losing their jobs and being. Everyday, you're hearing about this many thousand here and there......not just the large corporations, but the everyday smaller independent business are feeling the squeeze.

[Muadib]

Industrials Fall 445 Points - WSJ.com

Dow Industrials Drop 445 Points

Banks Tumble Again, With Citi Shedding 26%

Stocks' sharp slide continued Thursday, pushing both the Dow Jones Industrial Average and the S&P 500 to lows not seen since before the dot-com bubble.

The Dow Jones Industrial Average plunged 444.99 points, or 5.6%, to 7552.29. The benchmark's financial stocks were bludgeoned amid fears that more credit losses could begin to pile up from bets on commercial real estate, and that the balance sheets of financial institutions will be further sullied by what appears to be a worsening economic outlook.

Citigroup, which lost nearly a quarter of its value a day ago, dropped 26% amid anxiety about its credit exposure. But few banking companies were spared from a battering on Thursday. Fellow Dow components J.P. Morgan Chase and Bank of America declined by 18% and 14%, respectively.

Morgan Stanley, the Wall Street titan which recently converted itself into a bank holding company, fell more than 10% and ended trade under $10 a share. Goldman Sachs Group, undergoing a similar transformation to its Wall Street rival, fell 5.8% to $52. The S&P 500's financial sector dropped 10.7%, exerting a powerful undertow on the broad stock measure, which slid 6.7% to 752.44.
Mounting evidence that the economy is entering a deep and lasting slowdown has been pulling down the price of many commodities, which had soared early this year as investors bet that world-wide demand could survive a reversal in the U.S. Adding to the accumulating signs of economic distress, initial jobless claims jumped to the highest level in 16 years last week, data out on Thursday showed.


Crude-oil futures retreated under the $50 a barrel mark on the news, falling $4 a barrel, or 7.46%, to $49.62, the lowest settlement since May 23,2005. Crude has fallen 14.8% over the last five trading days and is down 48% for the year to date, after hitting a record closing high of $145.29 on July 3.


Crude's drop pulled energy stocks down sharply. The S&P's energy sector ETF swooned 12.4%, as giant like Exxon Mobil and Chevron, which are both Dow components, fell 6.7% and 8.8%, respectively.


Signs that the credit markets are binding up again added to the economic fears that have shadowed stocks over the past few weeks. Mortgage securities backed by Fannie Mae and Freddie Mac tumbled, and an index of leveraged loans fell to a new low. Even the safest corporate debt fell hard. The high-grade corporate bond index Markit CDX IG11 was 38.25 basis points wider than Wednesday's close at 282.5/283.5 basis points, according to Markit.


Those developments badly rattled many investors, who sought out the relative safety of the Treasury market, driving yields downward. The gains knocked the two-year yield below 1% for the first time and left the shortest-term Treasury bill rates at nearly zero.


The search for safety also helped flush investors into the dollar. The greenback hit a 17-month high on the Swiss franc and approached a six-year high against the U.K. pound. The yen also benefited as investors again grew wary of taking even modest risks. Late Thursday in New York, the euro was at $1.2463 from $1.2526 late Wednesday, while the dollar was at ¥93.92 from ¥95.97


Once again, the worst losses were seen late in the day, repeating a pattern that has become all too familiar to investors. Stocks market seesawed between gains and losses but began a steep slide around 2 p.m. as remarks from government officials cast doubt on a near-term resolution on an auto-maker bailout.


Treasury Secretary Henry Paulson ruled out directing money to the car makers from the $700 billion rescue fund for the financial-services industry. Democrats on Capitol Hill said auto makers must provide a survival plan before Congress will extend loans to the embattled companies.


"No one thinks a failure of any company in [the auto] industry would be a good thing. It's something to be avoided," he said. But he added: "It doesn't make any sense to put any money in if there isn't a clear path to viability."

General Motors and Ford had posted massive gains earlier in the session on hopes for an expanded bailout, but trimmed their gains through the close. GM ended 3.2% higher, while Ford was up 10.3%. At one point, GM shares surged by 30% before coming back to earth.


The volatility seen in the past two trading days recalls the hairpin turns seen during the worst days of the credit crisis in September. Many investors have been seeking to protect themselves from the wild gyrations; the Chicago Board Options Exchange Volatility Index, a popular gauge of investor anxiety, has shot higher in recent days and climbed 8.9% to 80.86 on Thursday.


"Deflation has come to the stock market just as much as it's come to the consumer sector," said Kim Caughey, senior investment analyst at Fort Pitt Capital Group in Pittsburgh. "People are looking at the market and thinking, well, that's a good price. But what if it falls more?"


Other stock measures fell sharply. The tech-focused Nasdaq Composite Index was down 5.1% to 1316.12. The small-stock Russell 2000 fell 6.6% to 385.31.


Just as investors' appetite for shares in profitless Internet companies ultimately led to disaster a few years ago, so too has home buyers' appetite for big houses they couldn't afford and Wall Street firms' appetite for risky bets on mortgage securities that executives didn't fully understand.


"There are momentary opportunities to make money in this market right now, but no chance to really invest for the long haul," said trader Chris Johnson, of the portfolio-management firm Johnson Research Group in Cincinnati.

—Deborah Lynn Blumberg, Prabha Natarajan and Kate Haywood contributed to this article

[barbaro]

Getting that news out of the States this morning. Another, in a recent series, of minor crashes. An added news note I pick up on this mornimg - the huge number of companies and business of every sort in the States are closing their doors or closing franchised locations. Not just a few. This is expansive. These closures and cutting-back measures really began in earnest some month ago.

Many stores will close after the Xmas holiday. There is a very long list. Retail has been hit hard b/c of the reduction in consumer spending.

The unemployment rate is fast approaching record highs, as people are losing their jobs and being.

We'll have to wait and see.

Everyday, you're hearing about this many thousand here and there......not just the large corporations, but the everyday smaller independent business are feeling the squeeze.

That's the way it is, during difficult economic times.

[Butterfly]

yeah, this is going to be brutal

The banks are crashing and rightly so, bringing down the index with them

when banks sneeze, it's never good news for the real sector, that's why they need to be nationalized, and diversified, can't let them use your money and multiply it by doing stupid shit. Why a bank like Citigroup exist in the first place ? huge and too many conflicting lines of business. What were the regulators thinking when they let that group buy insurance companies, other banks, brokers etc... against every rule of financial diversification from the 1920s

[Rural Surin]

The really sad aspect of today's American economy, is that it's built around the ideals of consumership. As MM has noted above, the major players in retail are floundering, claiming bankruptcy, and just closing up shop. The End. The list of current business and retailers failing is staggering. The whole mess - the unstable stock market, bank & financial instiyutions failing, high unemployment. It all trickles down. No more credit lines for anyone. Loans have been put on hold. No one is hiring, therefore no jobs - people are tighening their belts, therefore they tend to spend less, business' customer base decreases, more dismissals....it's a dark whole.

[Rural Surin]

yeah, this is going to be brutal

The banks are crashing and rightly so, bringing down the index with them

when banks sneeze, it's never good news for the real sector, that's why they need to be nationalized, and diversified, can't let them use your money and multiply it by doing stupid shit. Why a bank like Citigroup exist in the first place ? huge and too many conflicting lines of business. What were the regulators thinking when they let that group buy insurance companies, other banks, brokers etc... against every rule of financial diversification from the 1920s

You know Butters, everyone can speculate and analysis this situation forever - and everyone does, from the politician to the financial "expert" to the guy on the street. It's always my observation about the American culture which reflects their economy, this situation is socially made. The way in which Americans insist of living - way beyond their means.

[barbaro]

The really sad aspect of today's American economy, is that it's built around the ideals of consumership.

And one thing related to this economy that is 70% dependent on consumer spending is that a lot of this spending is adding to the Current Account Deficit (Trade Deficit). Nearly $1 Trillion dollars per year.

There have been and are now, dire warning about this. Sending dollars overseas when consumers are buying so many imported good that are produced in foreign countries.

As MM has noted above, the major players in retail are floundering, claiming bankruptcy, and just closing up shop. The End. The list of current business and retailers failing is staggering.

The list is pretty big and varied. Many people are being told to avoid "gift certificates" or "gift cards" for the Xmas holidays, and many will go under after the Christmas holiday shopping season.

[Muadib]

Weekly jobless rates are at a 16 year high with 560,000 Americans applying for unemployment insurance just last week... 4.3 million US workers are now unemployed... That is roughly the population of the state of Oregon...

Dow Jones Industrial closed yesterday at 7552, another one for the books...

When the auto industry bailout fails, the Dow will likely drop into the 6000 - 6500 range, followed by complete collapse...

All while Dubya sits in the White House and won't even speak to the topics as it is "no longer my job"...

All evidence of what 8 years of ineptitude can do to the "Strongest Economy in the World"...

[Boon Mee]

yeah, this is going to be brutal

The banks are crashing and rightly so, bringing down the index with them

when banks sneeze, it's never good news for the real sector, that's why they need to be nationalized, and diversified, can't let them use your money and multiply it by doing stupid shit. Why a bank like Citigroup exist in the first place ? huge and too many conflicting lines of business. What were the regulators thinking when they let that group buy insurance companies, other banks, brokers etc... against every rule of financial diversification from the 1920s

You know Butters, everyone can speculate and analysis this situation forever - and everyone does, from the politician to the financial "expert" to the guy on the street. It's always my observation about the American culture which reflects their economy, this situation is socially made. The way in which Americans insist of living - way beyond their means.

Got that right. To lay the blame at Dubya's feet is incorrect as it's been the last two years of a Democrat-controlled Congress that's produced this mess. Acorn and the entitlement mind-set of folks who think they deserve more than they're worth...

[Loy Toy]

The one thing that springs to my mind. are there any real proper systems set up and for banks and other lending instituations and for them to go after those who have not honoured their loan repayments.

Sure when a bank has to deal with 10 loan defaults (no problem), but when there are 1,000's, even tens of thousands I do not believe that they will be able to handle the backlog and within an acceptable time frame.

Much the same as the court system who will have to dish out so many bankruptsy rulings. Are they properly prepared....? I don't think so.

I am really afraid that the world economy is just about to venture onto foreign and yet to be navigated grounds. Plenty of quick sand ahead I fear!

[Muadib]

There's plenty of blame to go around and yes, the credit driven, consumer economy in the US bears much of the fault... Let's not forget who pushed the sub-prime mortgage regulation onto the banking industry in 1999... This, coupled with Americans living beyond their means and leveraging their way through life brought us to where we are today... Americans were only doing the same thing the US government has been doing for decades... Monkey see, monkey do... Zero regulation & oversight into the banking & financial markets... Thus my claim regarding failed policies of the last 8 years... It's all come home to roost and is dragging down every economy on the planet...

[GooMaiRoo]

There's plenty of blame to go around and yes, the credit driven, consumer economy in the US bears much of the fault... Let's not forget who pushed the sub-prime mortgage regulation onto the banking industry in 1999... This, coupled with Americans living beyond their means and leveraging their way through life brought us to where we are today... Americans were only doing the same thing the US government has been doing for decades... Monkey see, monkey do... Zero regulation & oversight into the banking & financial markets... Thus my claim regarding failed policies of the last 8 years... It's all come home to roost and is dragging down every economy on the planet...

Pretty good summary, although I think the rest of the planet shares the blame for this unfolding financial disaster. On the bright side, we could very well see a long-term, positive shift in cultural values. This is bound to happen in order for people to survive this long emergency. Consumerism will become anathema to many of us. So will personal debt, which is nothing more than a modern form of slavery. Extended families could become the new welfare system because the state will be unable to deliver essential services. When we think of career paths, we might actually focus on developing constructive, useful skills instead of parasitic ones such as flipping real estate, marketing and shifting money around ('finance'). This shift in values could very well decrease isolation and humanize us. Although this financial train wreck could be a prelude to war and carnage reminiscent of the 1930's, it could also lead to a positive cultural changes.