Wall Street joined world stock markets in a sell-off today, with the Dow industrials dropping more than 300 points and all the major indexes falling more than 3 percent.
NEW YORK — Wall Street has ended the week with another sharp loss, joining stock markets around the world that fell on the growing belief that a punishing economic recession is at hand.
It was a dramatic day on the Street, with the Dow Jones industrials falling more than 500 points soon after trading began, and, following the pattern of recent sessions, recovering ground only to fall sharply again.
At the close, the Dow was down 312.30, or 3.6 percent, at 8,378.95. Still, the blue chips remained above the 8,000 level; at its recent low of Oct. 10, the Dow traded as low as 7,882.51. The Dow hasn’t closed below that level since March 31, 2003, when it ended at 7,992.13.
Broader stock indicators also tumbled. The S&P 500 index fell 31.34, or 3.5 percent, to 876.77, and the Nasdaq composite index fell 51.88, or 3.2 percent, to 1,552.03.
Most Read Business Stories
- 55,000 in Washington state may have to pay back thousands in jobless benefits
- 1 house, 45 offers: Homebuyers in Western Washington hard-pressed as supply remains scarce
- Boeing CEO gave up millions in pay; here's what he and other top execs earned
- Jeff Bezos gets fraction of legal fees from girlfriend’s brother
- Highlights of the $1.9T COVID bill nearing final passage
Grim news from big global companies including Sony and Daimler, coming after disappointing outlooks from some big U.S. corporations, has investors believing there will be a long and deep global recession. The selling also came from hedge funds that had to unwind positions to pay back debts.
The pullback on Wall Street wasn’t as steep as some observers had feared, though the pace of selling at times accelerated. Massive declines occurred overseas today after another round of grim corporate news stirred fears about global economies. Investors also grew nervous after U.S. stock futures — the bets traders place on where the market will go — fell so sharply that selling halts were imposed.
But the session began and then progressed with more orderly selling than in other drops in the past month, including two that slashed more than 700 from the Dow industrials in a single day. Still, investors’ anxiety was clear today. The limits on futures and gyrations in everything from gold to the dollar underscored the fear and uncertainty that has gripped markets since the mid-September bankruptcy of investment bank Lehman Brothers and the subsequent freeze-up in the world’s credit markets.
The urgency to resuscitate lending since then was aimed at avoiding some of the problems that have nonetheless spread around the world. A profit warning today from electronics maker Sony sent its shares tumbling in Japan and offered only the latest example that companies are girding for a slowing economy and a pullback among consumers worried about falling home prices and losses on their investments.
And in Germany, Daimler’s stock fell sharply after the automaker reported lower third-quarter earnings and abandoned its 2008 profit and revenue forecast. That followed news in the U.S. late Thursday from Microsoft, which issued a weaker-than-expected forecast for its fiscal second quarter, pointing to the economy.
“People have been saying that we’re in a recession. This is the realization,” said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York.
It is clear that many investors are convinced the world economy is headed for a severe downturn even as governments have raced to jump-start credit markets on the hope that a return of more normal lending levels by banks and other financial houses will fan economic activity.
But some say the recent pullbacks have been set off by forced selling, keeping some bargain-seeking traders from entering the market.
“There’s nothing new going on,” said Scott Bleier, president of market advisory service CreateCapital.com. “This is all about the unwinding of massive leverage.”
Bleier attributed the declines to margin calls and investors in hedge funds and mutual funds cashing out. A margin call occurs when investors are forced to sell holdings, like stock, to raise cash at the demands of brokers.
“Market participants’ fear is not that the economy is slowing,” he said. “The fear is there is an endless supply of things for sale, regardless of price.”
Steve Gross, principal at alternative investment and advisory firm Penso Capital Markets, said most large hedge funds have already slashed their positions. Instead, he sees a lack of demand.
“There are no buyers at all,” he said.
Fearing more carnage in world equity markets, big hedge funds and other institutional investors have been pulling out their money en masse. Meanwhile, some individual investors who have seen their holdings decimated in recent weeks have been yanking money from the market, even as many market observers say it is wiser to wait out the market’s decline.
Jason Weisberg, a New York Stock Exchange trader for Seaport Securities, contends the selling has been overdone.
“Technically we’re way oversold,” he said. “We have these downdrafts on very light volume. But all that being said, historically speaking this is all unprecedented.”
Today was the 79th anniversary of the day that, according to many market historians, the October 1929 stock market crash began. Selling began on Thursday, Oct. 24, and accelerated the following week on the days that have since become known as Black Monday and Black Tuesday, Oct 28 and 29.
“We’ve moved from credit market concerns to economic concerns and people really don’t know what the impact on the economy is going to be, they don’t know the full impact. The market abhors uncertainty,” said Ben Halliburton, chief investment officer of Tradition Capital Management in Summit, N.J.
Demand for U.S. Treasurys remained high as investors sought safe places to put their money. The three-month bill, regarded as the safest asset around, fell to 0.85 percent from 0.94 percent late Thursday.
There were signs that credit markets continue to thaw but are doing so more slowly amid growing economic fears. The rate on three-month loans in dollars — a key bank-to-bank lending benchmark known as the London interbank offered rate, or Libor — fell to 3.52 percent from 3.54 percent on Thursday.
The rates have fallen steadily for 10 days as confidence in the banking industry has been helped by government rescue measures. However, the improvements were smaller today on concerns about the health of the global economy.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.71 from 3.66 percent late Thursday.
Gold futures briefly fell to their lowest level in 21 months today as the dollar strengthened and the drop in the world’s stock markets led investors to sell commodities to offset massive losses in equities. Gold regained much of what it lost later in the day though prices remain down by about 20 percent since the start of the month.
Ordinarily, gold is seen as a safe-haven investment during market upheavals.
The dollar has risen as a safety holding despite fears about the U.S. economy. Investors appear more worried about the stability of emerging markets. That’s hurting the euro, for example, because in Europe Iceland, Hungary, Ukraine and Belarus are all in talks with the International Monetary Fund to discuss possible loans. Investors are pulling money out of countries in Latin America and Asia amid worries about vulnerable countries.
Other commodities declined. Light, sweet crude fell $4.21 to settle at $63.63 on the New York Mercantile Exchange. The sell-off, another sign that investors fear a severe recession, came despite OPEC’s announcement that it will cut production by 1.5 million barrels a day in a bid to shore up sagging prices.
The pullback in global markets comes ahead of a planned meeting next week of the Federal Reserve’s interest rate committee. Policymakers are scheduled to announced a decision on interest rates on Wednesday.
Investors had been bracing for a rocky start on Wall Street after futures contracts for the Dow and the S&P 500 fell so low they triggered “circuit breakers,” which froze selling until the market’s opening. That slide raised the possibility that these emergency breaks intended to prevent panic selling could be triggered during the regular session — something that hasn’t happened since 1997. But the Dow’s decline was well short of the 10 percent, or 1,100-point, decline that would be needed to halt trading.
The panicky feeling ahead of the opening bell today came after Japan’s Nikkei stock average fell a staggering 9.60 percent. In Europe, Germany’s benchmark DAX index lost 4.96 percent, France’s CAC40 dropped 3.54 percent while Britain’s FTSE 100 sank 5 percent after the government said its gross domestic product fell 0.5 percent in the third quarter, putting the country on the brink of recession.
Hong Kong’s Hang Seng index fell 8.3 percent. Markets in India, Thailand, Indonesia and the Philippines were also down sharply as investors bailed from emerging markets to cut their exposure to risky assets and meet redemption needs at home. Stocks fell so sharply in Russia that the two main exchanges closed early.
Associated Press reporters Stevenson Jacobs, Sara Lepro and Stephen Bernard in New York, Carlos Piovano in London, Alex Kennedy in Singapore, Shino Yuasa in Tokyo and Kelly Olsen in Seoul and contributed to this story.