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Dow plummets over 5.5% by closing

Latest update : 2008-10-23

Following a dismal close in the Asian and European markets, the US Dow Industrial Average dropped over 500 points by the end of trading, amid stubborn recession fears.


US stocks accelerated their losses Wednesday in a global stock market rout driven by rising recession fears, with Wall Street investors nervous about dour company outlooks and tight credit.
   
The Dow Jones Industrial Average dropped 291.28 points (3.22 percent) to 8,742.38 around 1533 GMT and the tech-heavy Nasdaq composite slid 33.09 points (1.95 percent) to 1,663.59.
   
The broad Standard & Poor's 500 index fell a hefty 31.10 points (3.26 percent) to 923.95.
   
The selloff followed a sharp retreat Tuesday on economic worries that left the Dow down 2.50 percent, the Nasdaq a hefty 4.14 percent and the S&P 500 off 3.08 percent.
   
"The earnings news hitting the tape over the last two days is more pessimistic than that received from companies reporting earlier this month," said Fred Dickson, chief market strategist at DA Davidson & Co.
   
Dickson said that although much of the bad news was already embedded in stock prices, investors were selling off companies that had lowered guidance below analysts' estimates.
   
"It appears that investors are rethinking their assumptions about the depth and duration of the recession, recognizing that the credit crisis has taken an annoying economic slowdown into something far more serious," he said.
   
Patrick O'Hare, analyst at Briefing.com, said there were many issues stoking investors' concerns about global recession.
   
"Oil prices below 70 dollars per barrel, an acknowledgment from Bank of England governor (Mervyn) King that a UK recession seems likely, further job cut announcements in the US, heavy losses in foreign markets, and a litany of companies sounding a cautious view on 2009 prospects have all played a role in the market's economic concerns," O'Hare said.
   
In another move to get cash flowing again through the squeezed financial system, the Federal Reserve said it would raise the interest rate it pays on reserves deposited with it by banks, effective Thursday.
   
On Tuesday, the Fed announced that it was offering up to 540 billion dollars of help to money market mutual funds.
   
Despite the government's emergency actions, investors remained nervous about the fallout of the financial crisis on the real economy.
   
"Word that a number of companies are passing on stock buybacks in a bid to preserve cash has only added to the worries about the length and complexion of the economic slowdown," Briefing.com's O'Hare said.
   
"Accordingly, there is a stronger bias to sell than to buy at this juncture as festering concerns about near-term stock price deflation continue to outshine the favorable, long-term risk-reward proposition," he added.
   
Among stocks in focus, aerospace giant Boeing plunged 7.87 percent to 42.75 dollars after the company reported a sharp drop in quarterly profit, citing a prolonged labor strike and supply problems.
   
Merck fell 1.60 percent to 29.49 dollars. The pharmaceutical firm reported a 28 percent profit fall and announced it would cut 7,200 jobs by 2011.
   
McDonald's bucked the downturn, with a rise of 0.11 percent to 55.21, after the fast-food firm posted stronger-than-expected profit.
   
Computer maker Apple soared 7.13 percent to 98.01 after posting a 37.5 surge in quarterly net profit that topped market forecasts, boosted by better-than-expected sales of iPhones.
   
SanDisk plunged 29.27 percent to 10.44. South Korea's Samsung Electronics on Wednesday withdrew its 5.8-billion-dollar offer to buy the US flash-memory giant, saying it no longer believes the firm is worth the money.
   
Bonds advanced. The yield on the 10-year US Treasury bond fell to 3.652 percent from 3.703 percent Tuesday, and that on the 30-year bond dropped to 4.138 percent from 4.194 percent. Bond yields and prices move in opposite directions.

Date created : 2008-10-22

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