US Stocks Plunge, Dow Falls Over 300 Points As Fears Grip Market

**StrontiumDog** · 05-08-2011, 12:23 AM

AUGUST 4, 2011, 12:41 P.M. ET

US Stocks Plunge, Dow Falls Over 300 Points As Fears Grip Market

--Dow plunges over 300 points, major indexes slump into correction territory on growth worries

--Bank of New York Mellon prepares to charge large depositors to hold cash, reflecting flight into safer assets

--Central-bank interventions fail to assuage investors

By Brendan Conway and Jonathan Cheng Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Stocks plunged, driving the Dow Jones Industrial Average down more than 300 points, as investors appeared to lose faith in the ability of the world's policy makers to revive the global economy and stave off a rolling debt crisis in Europe.

The Dow slumped as much as 372.52 points, or 3.1%, to a low of 11523.92 in midday action, erasing all its gains for 2011. It recently was down 293, at 11611, a decline of 2.4%. The slump of the past few weeks has driven the Dow down almost 10% from its May intraday highs--a decline that would be classified as a correction.

The Standard & Poor's 500-stock index fell 34 points, or 2.7%, to 1227 in recent action. The S&P recently was in correction territory on an intraday basis, having fallen more than 10% since May. The Nasdaq Composite slumped 74 points, or 2.8%, to 2618.

Investors across the globe have been buffeted by economic and political turmoil in recent days. In the U.S., fears have turned from worries about a possible default by the U.S. government to a weakening economic outlook. A string of data have pointed to a slowing of the recovery and investors are now bracing for the closely watched nonfarm payroll report on Friday. In Europe, leaders are struggling to contain a growing debt crisis. Investors are increasingly worried that troubles are spreading to Italy and Spain, driving down stocks across the region and sending borrowing costs of peripheral nations soaring.

In the U.S., all but one Dow stock was lower as investors sold across the board. All of the S&P 500 sectors were in the red and just 12 of the 500 stocks were up.

"This is a fear-driven market. We're in a mini-free fall. It's not a Black Monday, or Black Thursday, but it's in pretty bad shape--all the big stocks are being liquidated," said Christian Thwaites, president and chief executive at Sentinel Investments.

Gold and silver, which had been up on the day, reversed course as investors sold the metals to meet stock-based margin calls, traders said. If investors have purchased stocks with borrowed money, they often have to front more cash if the price of those shares fall, known as a margin call.

Underscoring that worried investors are increasingly seeking cold cash, the Bank of New York Mellon Corp. (BK) is preparing to charge some large depositors to hold their funds. The biggest U.S. custodial bank said this week in a note to clients that it will begin slapping a fee next week on customers who have vastly increased their deposit balances over the past month.

The bank cited the massive dollar deposits it has received over recent weeks, as investors and corporations retreat from financial markets amid Europe's debt crisis and the recent debate over U.S. government borrowing.

Investors fled to Treasurys, sending the yield on the 10-year Treasury note, which falls as prices rise, down to 2.507.

Fretting about a slowdown, investors were also focused on a pair of policy moves abroad that did little to assuage their immediate worries.

The European Central Bank moved to reactivate two of its anti-crisis measures in attempt to stop the currency bloc's sovereign-debt woes from spreading to Italy and Spain. Japan intervened in currency markets to curb the strength of the yen, which has risen as investors shift into currencies considered safer assets.

"The concern is that you're seeing visible worry by government officials, by central bankers. The [worry] is, 'Are there any bullets left in the government arsenal to help'?" said Russ Koesterich, iShares Global Chief Investment Strategist at BlackRock. "Investors are realizing that the economy is very fragile, [but] it's not clear that governments are able to do much help."

In his press conference, ECB President Jean-Claude Trichet acknowledged downside risks to growth in the region, saying economic risks "may have intensified," and that recent data showed the growth pace in Europe has decelerated.

The ECB left key interest rates unchanged. Trichet's comments on the weakening economic recovery prompted the central bank to resume its program of government bond buying for the first time in five months. But traders said the central bank was only buying Portuguese and Irish sovereign bonds, a decision that Trichet acknowledged was not "unanimous."

"You've got a weak economy, the aversion of a debt crisis but not a solution, and you've got the rest of the globe starting to implode in a lot of areas, especially Europe," said Barry James, president and chief executive of the James Advantage Funds. "It's natural that people would react with fear."

US Stocks Plunge, Dow Falls Over 300 Points As Fears Grip Market - WSJ.com

**StrontiumDog** · 05-08-2011, 12:26 AM

FTSE Loses £50bn Amid Eurozone Crisis - Yahoo!

FTSE Loses £50bn Amid Eurozone Crisis

Sky News – 1 hour 16 minutes ago

Almost £50bn has been wiped off the value of the FTSE as the EU president warned the eurozone crisis is spreading.

The FTSE ended at 5393, down 191 points or 3.43%, taking £49.8bn from its value.

It is the biggest fall on the FTSE for more than two years.

Since last Friday morning, £124.97bn, or 8.17%, has been wiped off the value of the FTSE 100.

The biggest fallers were Inmarsat, down 19.3%, Lloyds Banking Group down 10.19% and Vedanta down 9.39%.

The falls come amid concern about American debt and the state of the eurozone countries.

In a letter to European Union leaders, Jose Manuel Barroso said: "Whatever the factors behind the lack of success, it is clear that we are no longer managing a crisis just in the euro area periphery."

He called for a re-assessment of all elements of the eurozone's current and future bailout funds.

And he told them the eurozone needs to convince markets that it can respond to the debt crisis.

The comments contributed to another day of sell-offs on the FTSE 100, which has seen nearly £125bn wiped off the value of London's leading shares since friday.

The FTSE 100 closed at 5393, losing 191 points to drop by 3.4%.

Gold reached another record high of \$1,677.9 as investors made a renewed bid for safe havens.

After leaving the eurozone's benchmark interest rate at 1.5% today, European Central Bank president Jean-Claude Trichet confirmed that the programme to purchase eurozone government bonds had not ended.

The ECB's Securities Markets Programme (SMP) has bought around 74 billion euros in public debt so far, to help support the financial system with liquidity.

The interest which the Italian and Spanish governments have to pay to service their debts climbed to record levels on Tuesday of 6.18% and 6.45% respectively.

At his news conference, Mr Trichet would not confirm whether the bank is propping up Spanish and Italian bonds through the (SMP).

The developments follow a grim verdict on the eurozone by the think tank Centre for Economics and Business Research (CEBR) which believes Italy will default and fall victim to the debt crisis due to its weak economy.

Italy and Spain, the eurozone's third and fourth largest economies, are both facing pressure from markets.

But Italy should be the focus, according to the CEBR as its debt mountain is far greater in terms of scale than Spain's.

Italian Prime Minister Silvio Berlusconi's recent £38bn austerity package is not tight enough, and will not be able to repair its weak economy, the think tank said following a speech to the Italian Parlaiment by Mr Berlusconi on Wednesday.

Speaking on Sky News, CEBR chief executive Doug McWilliams said: "Berlusconi hasn't solved the problem of the Italian economy, which has now become uncompetitive with the Euro."

The CEBR points out that, with Italy's economy twice as big as Greece, Portugal and the Irish Republic combined, a bailout would probably be unaffordable for the eurozone.

It would, in fact, mean the end of the eurozone altogether, the CEBR said.

Spanish Prime Minister Jose Luis Zapatero has in recent days sought to adopt a more proactive stance on tackling the crisis.

He has called for an early election to "create political and economic certainty", and delayed his summer holiday to deal with economic reforms.

**SiLeakHunt** · 05-08-2011, 02:25 AM

Buy gold, again !

**OhOh** · 05-08-2011, 02:50 AM

U.S. eats up most of debt limit in one day - Washington Times

"U.S. debt shot up $239 billion on Tuesday — the largest one-day bump in history — as the government flexed the new borrowing room it earned in this week’s debt-limit increase deal.

The debt subject to the statutory limit shot way past the old cap of $14.294 trillion to hit $14.532 trillion on Tuesday, according to the latest the Treasury Department figures, which are released on the next business day.

That increase puts the government already remarkably close to the new debt limit of $14.694, which means one day’s new borrowing ate up 60 percent of the $400 billion in space Congress granted the president this week.

Debt numbers go up and down regularly, depending on what the Treasury Department is redeeming or issuing on any day, but have been on a steep upward trend for the past decade as spending has ballooned and revenues have fluctuated.

For the past 2½ months, though, the number essentially was frozen as the government was poised to reach the borrowing limit set by law. The Treasury Department used extraordinary means to stall, but was about to run out of room on Tuesday.

With little time to spare, Congress and the White House managed to cobble together a deal to grant new borrowing authority: an initial increase of $400 billion, coupled with future increases."

Continues.......

**Hampsha** · 05-08-2011, 05:56 AM

WW3 on the way? Maybe just in the US.

It's not even Friday. What will happen tomorrow in the US?

**LooseBowels** · 05-08-2011, 06:12 AM

You shouldn't have borrowed all that dosh for your big house and buying gold that you can't afford and never could.

now we want it back and pronto

**spliff** · 05-08-2011, 08:51 AM

Originally Posted by SiLeakHunt

Buy gold, again !

Should have done that 2 years ago....would already have been 80% up...

**Tom Sawyer** · 05-08-2011, 10:20 AM

Not so sure about that. Once the USD stablises Gold could deflate - and fast.

**socal** · 05-08-2011, 01:15 PM

Originally Posted by Tom Sawyer

Not so sure about that. Once the USD stablises Gold could deflate - and fast.

Its not going to stabilize.

**StrontiumDog** · 05-08-2011, 02:10 PM

The reason the markets are diving - Ezra Klein - The Washington Post

Posted at 01:58 PM ET, 08/04/2011

The reason the markets are diving

By Ezra Klein

(Scott Olson - GETTY IMAGES)

Washington likes to talk about the economy in terms of things it can control. Spending and deficits. Stimulus. Policy uncertainty.

But the Dow Jones isn’t diving because spending has risen, deficits have grown or stimulus policy has changed. It’s diving because of forces Washington can’t control, and in many cases, doesn’t understand very well.
How many members of Congress do you think could give a coherent account of what has happened to oil or steel prices over the last three years? Or what’s happening in the Eurozone? Or to the yuan?

A dramatic gap has opened between the economy as Washington sees it -- and wants to intervene in it -- and the economy that actually exists. Whatever weak recovery we might have hoped for is being hindered by global commodity prices, consumer deleveraging, fears of flagging demand in emerging markets, earthquakes in Asia, and much more. Globally, it’s been an almost uninterrupted run of crises and bad luck. Meanwhile, Washington just spent two months arguing over whether it would pay its bills or spark an unnecessary financial crisis.

Last week, Congress resolved that question. This week, the markets are tanking. Which suggests that Washington is asking itself the wrong question.

The right question is simple enough to pose: Where will the recovery come from? The problem is that no one has an answer. And as one hopeful hypothesis after another is dashed, the markets are beginning to panic.

It won’t come from the United States. Our recovery has slowed, and updates to the Commerce Department’s growth figures have shown that the hole we’re in is significantly deeper than we realized. Thursday’s news only underscored that conclusion, as the early signs suggest that Friday’s job numbers report will be disappointing.

It won’t come from Europe or Japan. The debt crises in Greece, Spain, Portugal and Italy have quieted any conversation about recovery and raised the question of whether the Eurozone can survive. And Japan is still trying to rebuild after the horrific earthquake and tsunami that ripped across its coastline back in March.

For some time, the hope was that recovery could come from the world’s emerging economies, driven by China. But after years in which the Asian giant managed to defy global economic trends and post one incredible growth number after the other, the Chinese government is admitting that the economy has overheated and they need to begin tapping the brakes. That doesn’t simply suggest the emerging economies won’t drive a global recovery; it also raises a new source of concern: What if the Chinese government fails to engineer a soft landing for its economy?

The impoverished and reckless economic policy conversation in Washington isn’t helping to cope with these trends, but even if we got our act together, the reality is that we have limited influence over what happens in China or in the Eurozone and Japan. And it’s not even clear how much an ideal policy response would do to speed America’s recovery.

As bad as the daily data was two years ago, it was easier to tell a story of recovery. The full scope and stickiness of the financial crisis wasn’t yet visible, and the disappointments of the aftermath hadn’t yet sunk in.
Today there's more stability, but we seem to have stabilized into an era of high unemployment, low growth and endless risk. Rather than recovering from the crisis, it is almost as if we have settled into it. And no one quite knows how we’re going to escape.

**Butterfly** · 05-08-2011, 02:56 PM

it was expected, should bounce back in the next few days

buy, buy, buy

**baby maker** · 05-08-2011, 03:03 PM

Originally Posted by Butterfly

it was expected, should bounce back in the next few days

buy, buy, buy

.....butters....old sausage...where you been...
following your own advice...i hope...
i'm bidding CBAPA/ASX [at] 202/200.2....
....and just like you...old sausage...i'm getting filled...

Jees....maybe you are right....for once..

**baldrick** · 05-08-2011, 04:07 PM

why do people consider the USD to be a safe haven ?

thought they were due to have their rating downgraded.

and Bernake will be looking at instituting QE3 shortly

**billy the kid** · 05-08-2011, 05:42 PM

stocks go up and down
but this time the banks may not be bailed
could we be heading for Desolation Row.

**StrontiumDog** · 05-08-2011, 06:14 PM

Asian Leaders Vow to Respond If Needed - WSJ.com

AUGUST 5, 2011, 4:58 A.M. ET

Asian Leaders Vow to Respond If Needed

By NATASHA BRERETON-FUKUI

SINGAPORE—Asia-Pacific policy makers Friday voiced concern about the darkening of the global outlook and declared themselves ready to respond, potentially complicating the fight against inflation that many in the fast-growing region are waging.

Stocks tumbled overnight in Europe and the U.S.—with the Dow Jones Industrial Average marking its biggest single-day point loss since Dec. 1, 2008—and Asian markets continued the bearish tone Friday, as a potent combination of fears came to a head.

Since the U.S. narrowly avoided default earlier in the week, attention has focused on weakening growth prospects for the world's largest economy. Meanwhile, euro-zone leaders face the possibility that they may have to step in to support Italy and Spain.

Chinese Foreign Minister Yang Jiechi urged all countries to cooperate to boost the global economy's recovery and to overhaul the international financial system, as he warned of continuing sovereign debt risks in the U.S. and the European Union.

"The global economy is slowly recovering, but the situation is still complex with many uncertainties," Mr. Yang said in remarks made to a Polish news organization and posted on the Chinese Foreign Ministry's website Friday. Mr. Yang is currently visiting Poland, the ministry said.

"Developments continue with Europe's sovereign debt issues and the risk of a U.S. sovereign debt default has risen," he said.

Asia-Pacific officials have worked to keep a lid on inflation in recent months, as the region accelerated out of the global downturn. But renewed weakness elsewhere in the world raises the prospect some could dilute, pause or reverse their tightening medicine.

"We have the policy flexibility to deal with the uncertainty in the international economy should measures be required," Australia's Deputy Prime Minister and Treasurer Wayne Swan said, although he noted that growth in the Asia-Pacific region was strong.

The country's central bank separately warned that sovereign-debt woes in Europe and the U.S. could play out in a "disorderly and disruptive" manner, leading to a marked rise in risk aversion and uncertainty.

South Korean authorities said Friday they would step up the monitoring of financial markets amid heightened volatility. Officials from the Bank of Korea, the finance ministry and financial regulatory agencies are scheduled to meet Sunday to discuss market conditions and necessary policy responses, taking into account the latest economic data.

The nation's Ministry of Strategy and Finance said its economy could be affected by global uncertainties short term. But it also cited Korea's continuing growth, strong fiscal standing, adequate foreign-exchange reserves and the fact local exporters sell goods and services to different parts of the world.

Indonesian President Susilo Bambang Yudhoyono said Friday that the domestic economy is better prepared to weather the risks of a potential global slowdown than it had been in 2008. "We managed to minimize the impact of the 2008 global economic crisis," he said, adding that although "we hope what's happening in the U.S. and Europe does not lead to another crisis, it is our responsibility to anticipate and prepare ourselves."

Indonesian officials also cited continuing strong growth. Indonesia's gross domestic product grew 6.49% in the second quarter from a year earlier. "We see these falls as temporary and we believe the rupiah and stocks will rebound," said Hatta Rajasa, Indonesia's chief economic minister.

Bank of Thailand Gov. Prasarn Trairatvorakul expressed concerns about the risk of slowing global economic growth, but said further tightening was still needed, given clear signs of accelerating inflation.

The proposed spending policies of the incoming government, if fulfilled, would propel price growth, he added.

Philippines central bank governor Amanda Tetangco said he would be monitoring international developments carefully.

Some analysts said the global risks could spur policy makers to hold off from further tightening until the outlook becomes clearer.

"We … expect the Asian central banks which are still hiking rates—central banks in China, India, Korea, Taiwan and Thailand—to move to the defensive side to protect downside in growth," said Prakash Sakpal, an economist at ING Bank.

**Bower** · 05-08-2011, 07:34 PM

I had coffee this morning with a friend of mine who works for Hargreaves Lansdown, i asked him what i should do in the current market, his reply, he feels like a man who knows a hundred ways to make love to a woman but cant get a date !

**Chairman Mao** · 05-08-2011, 07:53 PM

Originally Posted by OhOh

"U.S. debt shot up $239 billion on Tuesday

lol..

**Tom Sawyer** · 05-08-2011, 10:55 PM

Originally Posted by Bower

I had coffee this morning with a friend of mine who works for Hargreaves Lansdown, i asked him what i should do in the current market, his reply, he feels like a man who knows a hundred ways to make love to a woman but cant get a date !

Of course that means he's now one hundred times richer - he just used his own money during this slow period.

LOL

**Tom Sawyer** · 05-08-2011, 11:06 PM

Unconventional Wisdom

A special anniversary report challenging the world's most dangerous thinking. - FT Foreign Policy Magazine (Jan/Feb 2011 Edition)

Immanuel Wallerstein
THE GLOBAL ECONOMY WON'T RECOVER, NOW OR EVER

Virtually everyone everywhere-economists, politicians, pundits -- agrees that the world has been in some kind of economic trouble since at least 2008. And virtually everyone seems to believe that in the next few years the world will somehow "recover" from these difficulties. After all, upturns always occur after downturns. The remedies recommended vary considerably, but the idea that the system shall continue in its essential features is a deeply rooted faith.

But it is wrong. All systems have lives. When their processes move too far from equilibrium, they fluctuate chaotically and bifurcate. Our existing system, what I call a capitalist world-economy, has been in existence for some 500 years and has for at least a century encompassed the entire globe. It has functioned remarkably well. But like all systems, it has moved steadily further and further from equilibrium. For a while now, it has moved too far from equilibrium, such that it is today in structural crisis.

The problem is that the basic costs of all production have risen remarkably. There are the personnel expenses of all kinds -- for unskilled workers, for cadres, for top-level management. There are the costs incurred as producers pass on the costs of their production to the rest of us -- for detoxification, for renewal of resources, for infrastructure. And the democratization of the world has led to demands for more and more education, more and more health provisions, and more and more guarantees of lifetime income. To meet these demands, there has been a significant increase in taxation of all kinds. Together, these costs have risen beyond the point that permits serious capital accumulation. Why not then simply raise prices? Because there are limits beyond which one cannot push their level. It is called the elasticity of demand. The result is a growing profit squeeze, which is reaching a point where the game is not worth the candle.

What we are witnessing as a result is chaotic fluctuations of all kinds -- economic, political, sociocultural. These fluctuations cannot easily be controlled by public policy. The result is ever greater uncertainty about all kinds of short-term decision-making, as well as frantic realignments of every variety. Doubt feeds on itself as we search for ways out of the menacing uncertainty posed by terrorism, climate change, pandemics, and nuclear proliferation.

The only sure thing is that the present system cannot continue. The fundamental political struggle is over what kind of system will replace capitalism, not whether it should survive. The choice is between a new system that replicates some of the present system's essential features of hierarchy and polarization and one that is relatively democratic and egalitarian.

The extraordinary expansion of the world-economy in the postwar years (more or less 1945 to 1970) has been followed by a long period of economic stagnation in which the basic source of gain has been rank speculation sustained by successive indebtednesses. The latest financial crisis didn't bring down this system; it merely exposed it as hollow. Our recent "difficulties" are merely the next-to-last bubble in a process of boom and bust the world-system has been undergoing since around 1970. The last bubble will be state indebtednesses, including in the so-called emerging economies, leading to bankruptcies.

Most people do not recognize -- or refuse to recognize -- these realities. It is wrenching to accept that the historical system in which we are living is in structural crisis and will not survive.

Meanwhile, the system proceeds by its accepted rules. We meet at G-20 sessions and seek a futile consensus. We speculate on the markets. We "develop" our economies in whatever way we can. All this activity simply accentuates the structural crisis. The real action, the struggle over what new system will be created, is elsewhere.

Immanuel Wallerstein is a senior research scholar at Yale University.

Jonas Bendiksen/Magnum Photos

**Tom Sawyer** · 05-08-2011, 11:13 PM

^
A good piece I think - though a bit of a hand-wringer (oi vey!) without clear suggestions for a way forward.

**Marmite the Dog** · 05-08-2011, 11:25 PM

I'm led to believe that the deregulation of the financial systems caused the problems, not the system itself. Wouldn't tougher regulation solve many of the problems like it did in Asia after '97?

**Butterfly** · 06-08-2011, 12:23 AM

^ indeed, all thanks to Reagan and Thatcher

**blue** · 06-08-2011, 12:53 AM

Traders don't own stocks and shares,
when other people buy or sell them, they get commission
so then when the market level falls ,why do they always show traders with thier head in thier hands

**Butterfly** · 06-08-2011, 01:00 AM

^ some are market makers, therefore they are definitely impacted as they have to keep inventory of the stock

**Agent_Smith** · 06-08-2011, 02:18 AM

Originally Posted by Tom Sawyer

The extraordinary expansion of the world-economy in the postwar years (more or less 1945 to 1970) has been followed by a long period of economic stagnation in which the basic source of gain has been rank speculation sustained by successive indebtednesses.

This has the ring of truth to it. I'm not an economist but this viewpoint seems to fit the last 40 years of economic activity, particularly here in the US.

Originally Posted by Marmite the Dog

I'm led to believe that the deregulation of the financial systems caused the problems,

Yes, when you let the players run the game then all sorts of bad shit happens. A good government is a good referee.

Thread: US Stocks Plunge, Dow Falls Over 300 Points As Fears Grip Market

Thread Tools

Display

US Stocks Plunge, Dow Falls Over 300 Points As Fears Grip Market

FT - The Global Economy Won't Recover now or Ever (from Jan/Feb 2011)

Thread Information

Users Browsing this Thread

Posting Permissions