The Great Depression of 2008. DJIA Drops 7% (780 points).
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AP
Stocks tumble as bailout plan fails in House
Monday September 29, 6:03 pm ET
By Tim Paradis, AP Business WriterStocks plunge as financial bailout plan fails in House vote; Dow fall 777, biggest drop ever
NEW YORK (AP) -- Wall Street's worst fears came to pass Monday, when the government's financial rescue plan failed in Congress and stocks plunged precipitously -- hurtling the Dow Jones industrials down nearly 7 percent. The almost 780-point decline was the largest one-day point drop ever for the index.The percentage declines for the Standard & Poor's 500 and Nasdaq composite indexes were even larger. And credit markets, whose turmoil helped feed the stock market's angst, froze up further amid the growing belief that the country is headed into a spreading credit and economic crisis.Stunned traders on the floor of the New York Stock Exchange, their faces tense and mouths agape, watched on TV screens as the House voted down in midafternoon the administration's $700 billion plan to buy up distressed mortgage securities. Activity on the floor became frenetic as the "sell" orders blew in.
The Dow told the story of the market's despair. The blue chip index, dropped by hundreds of points in a matter of moments, and by the end of the day had passed by far its previous record for a one-day drop, 684.81, set in the first trading day after the Sept. 11, 2001, terror attacks.
The selling was so intense that just 162 stocks rose on the NYSE -- and 3,073 dropped.
It takes an incredible amount of fear to set off such an intense reaction on Wall Street, and the worry now is that with the rescue plan's fate uncertain, no one knows how the financial sector hobbled by hundreds of billions of dollars in bad mortgage bets will recover.
While investors didn't believe that the plan was a panacea, and understood that it would take months for its effects to be felt, most market watchers believed it was a start toward setting the economy right after a credit crisis that began more than a year ago and that has spread overseas.
"Clearly something needs to be done, and the market dropping 400 points in 10 minutes is telling you that," said Chris Johnson president of Johnson Research Group. "This isn't a market for the timid."
The plan's defeat came amid more reminders of how troubled the nation's financial system is -- before trading began came word that Wachovia Corp., one of the biggest banks to struggle due to rising mortgage losses, was being rescued in a buyout by Citigroup Inc. It followed the recent forced sale of Merrill Lynch & Co. and the failure of three other huge banking companies -- Bear Stearns Cos., Washington Mutual Inc. and Lehman Brothers Holdings Inc.; all of them were felled by bad mortgage investments.
And it raised the question: Which banks are next, and how many? The Federal Deposit Insurance Corp. has a list of over 110 banks that were in trouble in the second quarter, and that number surely has grown in the third.
Traders on the floor were stunned by the House vote.
"How could this have happened? Is there such a disconnect on Capitol Hill? This becomes a problem because Wall Street is very uncomfortable with uncertainty," said Gordon Charlop, managing director with Rosenblatt Securities. "The bailout not going through sends a signal that Congress isn't willing to do their part."
Wall Street is contending with all these issues against the backdrop of a credit market -- where bonds and loans are bought and sold -- that is barely functioning because of fears that anyone lending money will never be paid back.
The evidence of the credit markets' ills could again be found Monday in the Treasury's 3-month bill; investors were stashing money there, willing to take the tiniest of returns simply to be sure that their principal would survive in what's considered the safest investment. The yield on the 3-month bill was 0.15, down from 0.87, and approaching zero, a level reached last week when fear was also running high.
Analysts said the government needs to find a way to help restore confidence in the markets.
"It's probably fair to say that we are not going to see any significant stability in the credit markets or the stock market until we see some sort of rescue package passed," said Fred Dickson, director of retail research for D.A. Davidson & Co.
Treasury Secretary Henry Paulson indicated that the government would try again.
"We need to put something back together that works," Paulson said. "We need it as soon as possible."
On Wall Street, the Dow fell 777.68, or 6.98 percent, to 10,365.45. The decline also surpasses the 721.56-point intraday decline record also set during the first trading day after the terror attacks. Still, it was the 17th biggest percentage decline for the Dow and remained well below the more than 20 percent drops seen on Black Monday of October 1987 and the Depression.
Broader stock indicators also tumbled. The Standard & Poor's 500 index declined 106.85, or 8.81 percent, to 1,106.42. It was the S&P's largest-ever point drop and its biggest percentage loss since the Oct. 19, 1987, crash.
The Nasdaq composite index fell 199.61, or 9.14 percent, to 1,983.73, the third worst percentage decline for the index.
The Russell 2000 index of smaller companies fell 47.07, or 6.68 percent, to 657.72.
A huge drop in oil prices was another sign of the economic chaos that investors fear. Light, sweet crude fell $10.52 to settle at $96.36 on the New York Mercantile Exchange as investors feared that energy demand would continue to slide amid further economic weakness.
And gold, where investors flock when they need a relatively secure investment, rose $23.20 to $911.70 on the Nymex.
Marc Pado, U.S. market strategist at Cantor Fitzgerald, said investors are worried about the spread of troubles beyond banks in the U.S. to Europe and other markets.
"Things are dying and breaking apart," he said.
The federal Office of Thrift Supervision, one of the government's banking regulators, indicated that the market was overreacting to the House vote and that its fears about the financial system are misplaced.
"There is an irrational financial panic taking place today, and we support and applaud the continuing efforts of Secretary Paulson and congressional leadership to restore liquidity and public confidence," John Reich, Director of the federal Office of Thrift Supervision, said in a statement. "We will continue to work diligently with our institutions to ensure they operate safely and soundly, and to restore stability to the marketplace."
Spokesmen for the Treasury Department's Office of the Comptroller of the Currency and the Securities and Exchange Commission had no immediate comment after the House voted against the bailout package.
Lawmakers voted down a plan that was different than what the Bush administration had originally proposed. There were restrictions allowing Congress to limit how much of the money goes out the door at once. It also included caps on pay packages of top executives as well as assurances that the government also would ultimately be reimbursed by the companies for any losses. The Treasury would have been permitted to spend $250 billion to buy banks' risky assets, giving them a much-needed necessary cash infusion. There also would be another $100 billion for use at president's discretion and a final $350 billion if Congress signs off on it.
But Wall Street found further reason for worry overseas, as the fallout from U.S. economic problems kep spreading. Three European governments agreed to inject Fortis NV with a $16.4 billion bailout. Fortis, with has headquarters in Brussels, Belgium and Utrecht, Netherlands, is Belgium's largest retail bank.
The British government, meanwhile, said it is nationalizing mortgage lender Bradford & Bingley, which has a $91 billion mortgage and loan portfolio. It was the latest sign that the credit crisis has spread beyond the U.S.
The economic news in the U.S. only made matters worse. The Commerce Department said consumer spending fell in August to its lowest level in six months, while analysts expected it to edge up slightly. With consumers already uneasy and the uncertainty from the financial markets likely to spill over to the rest of the country, the outlook for spending remains bleak -- and consumers are the biggest driver of economic growth.
Business Writers Joe Bel Bruno in New York and Christopher S. Rugaber in Washington contributed to this report.
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Pity the SGX today, it's going to be a long day.
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Actually it's only right that the house of representatives oppose the bill, the rich invest in these companies making lots of money, when there is a crisis these same investors should take the brunt of the impact instead of relying on the government to bail them out.
Rich investors are more at risk of losing more money than poor folks. There is no doubt that recession will set in if the bill is met with further opposition in the house. With recession, comes more unemployment and business failures. But then again, with unemployment the poor folks will be able to get unemployment checks, not sure if the rich are able to get it, but the impact on the rich is higher than the poor. With recession price levels will fall, making housing, products and services cheaper.
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Democracy at work. The Government, the leaders of parliament can agree but the members of parliament can reject.
Unlike in some despots run countries....
"Biggest hike in 8 years
EXPECT to pay an average of 21.5 per cent more on your monthly electricity bill until the year’s end, consumers have been told."
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Originally posted by AndrewPKYap:
Good good, many sad and depressed brokers and stockers will drown their sorrow at my pubs, stock down is big business for me. Yeah!!! so is F1
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Some might not be able to afford to go to pub leh. Buy cheaper beer from NTUC or Black Cat from 7-11.
Or some just go straight to the tallest HDB Block....
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the senator dare not vote for the bailout. As they clearly know what the mainstreet are feeling.
i strongly propose, in order to pacify the anger from the mainstreet, FBI or whatever authority has to prosecuted a few of these top CEO, executives who are to blame for this financial meltdown.
only then can the senator better sell the bailout plan to the mainstreet.
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Today sti never change? haha asia finally can look thorugh the american political bullshit... STI didnt have bloodbath as many would have expected.. Well done Singapore.
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Yeah. Trading is doing considerably well considering the bill was voted against. But then again, it might be still early to say.
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hmm, can someone explain what the bail out is all about?
kinda interested to learn abit more about these kinda stuff.
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Originally posted by maurizio13:
Pity the SGX today, it's going to be a long day.
seemingly unaffected like HK .... but surely will move if dow continues south today in a big way... -
Originally posted by dumbdumb!:
hmm, can someone explain what the bail out is all about?
kinda interested to learn abit more about these kinda stuff.
From what I understand, which is very limited...
US Government plan on setting aside a large some amount (700bn) of money, to buy over all the bad mortgages that some of the investment banks are stuck with. That should in theory infuse $ into the banking system, allowing banks the confidence to start loaning out again.
Then, hopefully, in time, the mortgages will gain in value, and the government can sell them back out at profit.
I think the others have to fill u in on the stuff i missed out.
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Originally posted by maurizio13:
Pity the SGX today, it's going to be a long day.
did you manage to load any bargains during this morning's panic selling?
I got my SPH at opening price
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I thot we can't do short selling here...?
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if you seriously look at the drop it is just the number that gain during previous week.
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Originally posted by Shotgun:
I thot we can't do short selling here...?
I'm a longist :D
Load at cheap cheap. If it falls further below ytd's opening price, I can still do one final buy up of that lau ah pek stock :D
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Originally posted by eagle:
did you manage to load any bargains during this morning's panic selling?
I got my SPH at opening price
Not yet. -
Originally posted by maurizio13:
Not yet.still got chance got chance :D
It's nearing the end of "sell in May and go away" period... :D
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we will see roller coaster rides in the markets as they try to pass the rescue bill.
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AP
Dow industrials plunge 500 amid global sell-off
Monday October 6, 10:55 am ET
By Joe Bel Bruno, AP Business Writer
Dow industrials plunge more than 500 points amid growing fears that credit crisis is spreadingNEW YORK (AP) -- Wall Street is plunging, with the Dow Jones industrials down more than 500 points amid growing fears that the credit crisis is spreading around the world.Investors are realizing that the Bush administration's $700 billion rescue plan won't work quickly to unfreeze credit markets, and many banks are still having difficulty gaining access to cash. European governments also took steps over the weekend to limit the damage from the growing global financial crisis.
The Federal Reserve also took fresh steps to help ease credit markets Monday.
The Dow is down more than 570 points at the 9,747 level.
By JOE BEL BRUNO
AP Business Writer
NEW YORK (AP) -- Wall Street tumbled Monday, joining a selloff around the world as fears grew that the financial crisis will cascade through economies globally despite bailout efforts by the U.S. and other governments. The Dow Jones industrials skidded more than 400 points and fell below 10,000 for the first time in four years, while the credit markets remained under strain.
The markets have come to the sobering realization that the Bush administration's $700 billion rescue plan won't work quickly to unfreeze the credit markets, and that many banks are still having difficulty gaining access to cash. That's caused investors to exit stocks and move money into the relative safety of government debt.
Over the weekend, governments across Europe rushed to prop up failing banks. The German government and financial industry agreed on a $68 billion bailout for commercial-property lender Hypo Real Estate Holding AG, while France's BNP Paribas agreed to acquire a 75 percent stake in Fortis's Belgium bank after a government rescue failed.
The governments of Germany, Ireland and Greece also said they would guarantee bank deposits.
The Federal Reserve also took fresh steps to help ease seized-up credit markets. The central bank said Monday it will begin paying interest on commercial banks' reserves and will expand its loan program to squeezed banks.
Investors took a bleak view of the future, seeing no end to the crisis in the near term. But analysts were more optimistic.
"These programs are going to be effective I believe," said Rob Lutts, chief investment officer at Cabot Money Management. "Shorter term we're in a very challenging environment that's going to take a while."
In midmorning trading, the Dow Jones industrial average fell 403.65, or 3.91 percent, to 9,921.73, dropping below 10,000 for the first time since Oct. 29, 2004. At one point, the Dow was down more than 400.
Broader indexes also tumbled. The Standard & Poor's 500 index shed 51.71, or 4.70 percent, to 1,047.52; and the Nasdaq composite index fell 95.83, or 4.92 percent, to 1,851.56. The Russell 2000 index of smaller companies dropped 28.78, or 4.65 percent, to 590.62.
In Asia, the Nikkei 225 closed 4.25 percent lower. Europe's stock markets also declined, with the FTSE-100 down 3.24 percent, Germany's DAX down 5.28 percent, and France's CAC-40 down 5.60 percent.
The anxiety was again obvious in the credit markets. The yield on the three-month Treasury bill slipped to 0.38 percent from 0.50 percent late Friday. Demand for bills remains high because of their safety; investors are willing to take extremely low returns just to have their money in a secure place.
Investors also moved into longer-term Treasury bonds. The yield on the 10-year note fell to 3.52 percent from 3.60 percent late Friday.
Banks' hesitation to lend to one another and to many businesses and individuals is the result of the bad mortgage debt that the financial rescue is supposed to sweep up. But it's still unclear how quickly financial institutions will be able to hand that debt to the U.S. government and convince the markets they are healthy again.
There has been some hope that perhaps the Fed, in concert with other central banks, might cut interest rates to help stimulate the economy. With oil prices well off their midsummer highs and indicators pointing to a slower economy, the Fed's worries about inflation are less than they had been, making it easier to justify a rate cut.
Oil prices fell to an eight-month low below $90 a barrel on speculation that the spreading financial crisis will exacerbate a global economic slowdown and further cut demand for crude oil. Light, sweet crude tumbled $3.82 to $90.06 a barrel on the New York Mercantile Exchange.
Investors might get some indication about a potential rate cut with several policymakers slated to speak this week. Dallas Fed President Richard Fisher and Chicago Fed President Charles Evans will speak on the U.S. economy on Monday. Federal Reserve Chairman Ben Bernanke is due to speak on Tuesday.
Frederick Dickson, chief market strategist at D.A. Davidson & Co., believes investors are eager for any signs about the well being of the economy.
"Wall Street at this point is shifting its attention from whether Congress was going to act on the emergency stabilization bill to the realization that the economy is slowing significantly faster than most analysts had expected," he said. "The downturn has shifted from first gear to about third gear in about two weeks."
In corporate news, ailing Hartford Financial Services Group Inc. received a $2.5 billion investment from European insurer Allianz. Hartford's market value was halved last week on concerns it needed more capital to survive, but shares recovered $4.53, or 16.5 percent, to $31.93 on Monday.
EBay Inc. fell $1.14, or 6 percent, to $17.81 after announcing it will cut about 1,000 jobs, reducing its work force by 10 percent, to streamline the company. The online auction site expects restructuring charges of about $70 million to $80 million, mostly during the fourth quarter.
Wells Fargo & Co. said late Sunday its takeover agreement with Wachovia Corp. will go forward after a state appeals court blocked a lower court ruling that favored rival bidder Citigroup Inc. Wells Fargo said it will "continue working toward the completion of its firm, binding merger agreement" with Wachovia.
Shares of Wells Fargo rose 6 cents to $34.68, while Citi fell 64 cents, or 3.5 percent, to $17.78. Wachovia fell 18 cents, or 2.9 percent, to $6.03.
Eli Lilly & Co. said its board approved an acquisition of ImClone Systems Inc. for more than $6 billion. The deal, which also has been approved by ImClone's board, will create one of the leading oncology franchises in the biopharmaceutical industry. Eli Lilly fell $1.53, or 3.7 percent, to $39.75, while ImClone surged $2.80, or 4.3 percent, to $67.75.
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Caution for investors, do not attempt to catch a falling knife. Unless you are cash rich and can afford to average down on a good company.
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During this time, it would be best to split your buys into 3.
eg. if you want to buy ABC, you decided to invest 10k in it. Start with buying 3K, then another 3K if prices drop more than 5-10%(your choice to allocate), then if you are very sure, add on your 4k.
Of course, we do not attempt to predict the market bottom, however, the current trend is down.
For value investors, increase your margin of safety to 60% or more, look for good bargains.
Good luck
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Dow plunges 679 to fall to lowest level in 5 years
Thursday October 9, 7:27 pm ET
By Tim Paradis, AP Business Writer
Dow plunges 679 points to trade below 9,000 for the first time in 5 years in afternoon sell-offNEW YORK (AP) -- Stocks plunged Thursday, sending the Dow Jones industrial average down 679 points -- more than 7 percent -- to its lowest level in five years. Stocks took a nosedive after a major credit-rating agency said it might cut its rating on General Motors and Ford, further rattling investors already fretting over the impact of tight credit on the economy.The Standard & Poor's 500 index also fell more than 7 percent.The declines came on the one-year anniversary of the closing highs of the Dow and the S&P. The Dow has lost 5,585 points, or 39.4 percent, since closing at 14,164.53 on Oct. 9, 2007. It's the worst run for the Dow since the nearly two-year bear market that ended in December 1974 when the Dow lost 45 percent. The S&P 500, meanwhile, is off 655 points, or 41.9 percent, since recording its high of 1,565.15.
U.S. stock market paper losses totaled $872 billion Thursday and the value of shares over all has tumbled a stunning $8.33 trillion since last year's high. That's based on figures measured by the Dow Jones Wilshire 5000 Composite Index, which tracks 5,000 U.S.-based companies' stocks and represents almost all stocks traded in America.
Thursday's sell-off came as Standard & Poor's Ratings Services put General Motors Corp. and its finance affiliate GMAC LLC under review to see if its rating should be cut. The action means there is a 50 percent chance that S&P will lower GM's and GMAC's ratings in the next three months. GM has been struggling with weak car sales in North America.
S&P also put Ford Motor Co. on credit watch negative. The ratings agency said that GM and Ford have adequate liquidity now, but that could change in 2009.
GM, one of the 30 stocks that make up the Dow industrials, fell $2.15, or 31 percent, to $4.76, while Ford fell 58 cents, or 22 percent, to $2.08.
"The story is getting to be like that movie 'Groundhog Day,'" said Arthur Hogan, chief market analyst at Jefferies & Co. He pointed to the still-frozen credit markets, and Libor, the bank-to-bank lending rate that remains stubbornly high despite interest rate cuts this week by the Federal Reserve and other major central banks.
"Until that starts coming down, you'll be hard-pressed to find anyone getting excited about stocks," Hogan said. "Everything we're seeing is historic. The problem is historic, the solutions are historic, and unfortunately, the sell-off is historic. It's not the kind of history you want to be making."
The Dow ended the day at its lows, finishing down 678.91, or 7.3 percent, at 8,579.19. The blue chips hadn't closed below 9,000 since June 30, 2003, and haven't closed at this level since May 21, 2003.
The Dow's tumble in the last seven sessions is its steepest ever in terms of points and the worst percentage decline since a downturn ending Oct. 26, 1987, when the Dow lost 23.8 percent. That sell-off included Black Monday, the Oct. 19, 1987 market crash that saw the Dow fall nearly 23 percent in a single day.
Broader stock indicators also tumbled Thursday. The S&P 500 fell 75.02, or 7.6 percent, to 909.92, while the Nasdaq composite index fell 95.21, or 5.5 percent, to 1,645.12.
The Russell 2000 index of smaller companies fell 47.37, or 8.7 percent, to 499.20.
A wave of fear about the economy sent stocks lower in the final two hours of trading after a volatile morning in which major indicators like the Dow and the S&P 500 index bobbed up and down. The Nasdaq, with a bevy of tech stocks, spent much of the session higher but eventually declined as the sell-off intensified. Still, its losses were less severe because of the relatively modest drops in names like Intel Corp. and Microsoft Corp.
On the New York Stock Exchange, declining issues came to nearly 3,000, while fewer than 250 advanced.
The sluggishness in the credit markets that triggered much of the heavy selling in markets around the world since mid-September appeared little changed Thursday following days of efforts by the Federal Reserve and other central banks to resuscitate lending.
Libor, the bank lending benchmark, for three-month dollar loans rose to 4.75 percent from 4.52 percent on Wednesday. That signals that banks remain hesitant to make loans for fear they won't be paid back.
The Fed and other leading central banks this week lowered key interest rates to help unclog the credit markets and promote lending to help the global economy. While a rate cut can take up to a year to work its way through the economy, the move was aimed as a boost to investor sentiment.
"We're stuck in a morass and I think it's going to take quite some time to come out of it," said Stephen Carl, principal and head of equity trading at The Williams Capital Group.
Demand remained high for short-term Treasurys, a refuge for investors willing to trade modest returns to protect their money. The yield on the three-month Treasury bill, which moves opposite its price, fell to 0.58 percent from 0.63 percent late Wednesday. Longer-term debt prices fell, with the yield on the 10-year note rising to 3.79 percent from 3.65 percent late Wednesday.
Investors across markets were mulling a plan being considered by the Bush administration to invest in hobbled U.S. banks as a way to stabilize the financial sector. The $700 billion rescue package signed into law last week allows the Treasury Department to inject fresh capital into financial institutions and obtain ownership shares in return.
Britain rolled out a similar plan, though no U.K. bank has received any investments. In Iceland, the government now has control of the country's three major banks as it struggles to contain the troubles there.
Wall Street is also looking for any effects of short selling now that a three-week ban imposed by regulators has expired. Short selling is a technique in which investors borrow shares in a company from a broker and sell them, hoping to buy them back later at a lower price. Essentially, it's a bet that a stock's price will fall. Short sellers can lose money if they have to repurchase the stock after it has risen.
Some analysts believe the unprecedented ban on short selling -- an effort to bolster investor confidence -- did more harm than good at a time of historic market volatility. They contend that short sellers help the market rally by covering their bets and creating demand for stocks.
"I think the market's way oversold. But I can't stand in the way of this falling knife -- I'd get sliced open," said Phil Orlando, chief equity market strategist at Federated Investors. "Investors are just saying, get me out at any price."
He also said that with the short-selling rule back in play, hedge funds might be shorting again to make up for their forced liquidations.
Energy names were among the biggest decliners as the price of oil fell and investors worried about a slowing economy. Exxon Mobil Corp. fell $9, or 12 percent, to $68, while Chevron Corp. fell $9.10, or 12 percent, to $64.
Light, sweet crude fell $1.81 to settle at $86.62 a barrel on the New York Mercantile Exchange, the lowest closing price since October last year.
Health insurer WellPoint Inc. fell $3.94, or 9.7 percent, to $36.50, while insurer and investment manager Lincoln National Corp. fell $9.66, or 35 percent, to $18.31.
The tech sector saw less selling than other parts of the market after IBM Corp. affirmed its forecast.
IBM fell $1.55, or 1.7 percent, to $89. Meanwhile, Intel fell 65 cents, or 4 percent, to $15.60 and Microsoft fell 71 cents, or 3.1 percent, to $22.30.
Consolidated trading volume on the NYSE came to 8.14 billion consolidated shares compared with 8.54 billion traded Wednesday.
In Asia, Japan's Nikkei 225 closed down 0.50 percent while the Hang Seng added 3.31 percent. In Europe, Britain's FTSE-100 fell 1.21 percent, Germany's DAX fell 2.53 percent, and France's CAC-40 declined 1.55 percent.
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our market went up yesterday.
unbelievable!! i wonder who bought in stocks again.