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Wall Street follows European stock decline

Text by AFP

Latest update : 2008-11-17

The markets keep being disappointed by the G20 summit and nervous about the announcement of Japan entering recession and, after the European stocks fell sharply, Wall Street's main index was also down 2.63 % at session closing.

US stocks fell heavily Monday in a tug of war session between bulls and bears after the Group of 20 weekend economic summit failed to calm investor fears and global recession worries intensified.

The Dow Jones Industrial Average dropped 223.73 points (2.63 percent) to close at 8,273.58 and the Nasdaq fell 34.80 points (2.29 percent) to 1,482.05.

The broad Standard & Poor's 500 index declined 22.54 points (2.58 percent) to end at 850.75.

Trading remained nervous as markets reacted to news that Japan had joined the eurozone in recession and more forecasts said the US economy was likely headed for the same fate.

A series of rally attempts failed to hold and selling accelerated late in the day.

"Wall Street, as well as Main Street, continues to suffer from a massive lack of confidence," said Fred Dickson, market strategist at DA Davidson & Co.

"The flow of redemptions from mutual funds and hedge funds, which forces managers to sell positions to meet the demand, have blunted market rallies and extended an already nasty bear market."

The market found little to cheer about from the G20 summit statement in which the economic powers pledged to work together to steady markets and the economy.

"Investors viewed the result of the summit as mere hollow pledges by world leaders to stimulate growth," said Chris Lafakis at

Carl Weinberg, chief economist at High Frequency Economics, said the G20 failed to change the near-term outlook.

"Call us hopelessly optimistic, but we would have thought the heads of state of 20 troubled economies, gathering in one place, could have agreed to specific, coordinated actions to address the immediate problem of global recession," Weinberg said.

"No concrete coordinated actions were announced that will change anyone's outlook for the world economy, exchange rates or interest rates."

Significantly, Japan said its economy, the second=largest in the world, contracted 0.1 percent in the third quarter after shrinking 0.9 percent in the second, joining what is expected to be a worldwide recession.

"The market isn't finding much comfort in anything right now," said Patrick O'Hare at

Ryan Detrick at Schaeffer's Investment Research said that he believed the market was not yet ready for a comeback.

"I don't think we've seen our ultimate lows," he said.

"There is fear in this market, but not nearly enough to signal the end of a bear market."

Among stocks in focus, Citigroup dropped 6.62 percent to 8.89 dollars after the US banking giant announced plans to cut as many as 50,000 jobs worldwide to cope with the financial crisis and heavy losses.

Bank of America shed 8.47 percent to 15.03 dollars after exercising an option to buy more shares in China Construction Bank Corporation.

General Motors saw a snapback of 5.6 percent to 3.18 dollars as US lawmakers were set to debate a bailout plan for the troubled US auto sector. GM also announced plans to sell its stake in Japanese automaker Suzuki.

Bonds gained. The yield on the 10-year US Treasury bond dropped to 3.684 percent from 3.750 percent Friday and that on the 30-year bond eased to 4.206 percent against 4.230 percent. Bond yields and prices move in opposite directions.

Date created : 2008-11-17