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Dow posts worst-ever point decline
Blue-chip index plunges 778 points after House rejects bailout bill
MSNBC News Services
updated 4:54 p.m. ET, Mon., Sept. 29, 2008
NEW YORK - Wall Street ended a stunning session with a huge loss Monday, with the Dow Jones industrial average plunging 778 points — its largest point drop ever — after the failure of a House vote on the financial bailout plan.
Wall Street started tumbling as the vote was shown on television Monday afternoon, sending investors fleeing to the relative safety of credit markets, worrying that the financial system would continue to sink under the weight of failed mortgage debt.
The plan’s failure means no one knows how the financial sector hobbled by hundreds of billions of dollars in bad mortgage bets will recover. The credit markets remain close to frozen as banks are too afraid to lend — including loans to other banks.
The Dow closed the day down 777.68 points, or 6.89 percent, beating its previous record set on the first trading day after the Sept. 11, 2001, terror attacks. Still, in percentage terms, the decline remained well below the more than 20 percent drops seen on Black Monday of October 1987 and at the beginning of the Depression.
“This is panic, and fear is running amok,” one trader told CNBC. “We are in a classic financial meltdown, and it’s panic-based. We’re seeing panic selling.”
Chris Johnson, president of Johnson Research Group, said Monday’s market was not for the timid.
“Clearly something needs to be done,” he said. “And the market dropping 400 points in 10 minutes is telling you that.”
While investors had some worries that the vote would be close, many on Wall Street appeared to believe it would ultimately pass. The proposal wasn’t been seen on the Street as a panacea for the deepening problems in the financial sector that have led to the failure of Lehman Bros. and Washington Mutual and the forced sale of Merrill Lynch & Co. and Wachovia Corp. — and that still pose a threat to many other banks.
The markets turned highly volatile as it became clear the measure wouldn’t find the necessary support. The broad Standard & Poor’s 500-stock index closed down 106.59 points, or 8.79 percent, while the Nasdaq composite index tumbled 199.61 points, or 9.14 percent — its third-worst point decline ever.
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.
Investors also faced other worries about the banking system. Wachovia became the latest big bank to be rescued from its overwhelming bad mortgage debt, agreeing to a federally brokered buyout of its banking operations by Citigroup Inc.
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 while they sit there and vote on this thing,” he said.
The dollar fell against other major currencies, while gold prices rose.
Crude oil fell $11.39 to $95.50 on the New York Mercantile Exchange as investors feared that a worsening economy would slice into energy demand. If the decline held, it would be oil’s largest ever one-day drop.
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 while they sit there and vote on this thing,” he said.
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.
Wall Street found further reason for worry overseas. 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.
Japan’s Nikkei stock average fell 1.26 percent. Britain’s FTSE 100 fell 5.30 percent, Germany’s DAX index fell 4.23 percent, and France’s CAC-40 fell 5.04 percent.
Meanwhile, consumer spending fell in August to its lowest level in six months. The Commerce Department said spending remained unchanged rather than increasing 0.2 percent as economists had expected. It was the worst showing since February.
Personal incomes rose a better-than-expected 0.5 percent after falling 0.6 percent drop in July. But after-tax incomes fell by 0.9 percent. Incomes benefited in past months from the government’s stimulus checks.
Wall Street is also worried about overall sluggishness in the world’s economy. In the U.S., for example, unemployment now sits at a five-year high of 6.1 percent. That rate is expected to increase, perhaps putting further pressure on consumer spending, which accounts for more than two-thirds of the nation’s economic activity.
The Associated Press and Reuters contributed to this report.
URL: Dow posts worst-ever point decline - Stocks & economy - MSNBC.com -
It is just rainy.
The subprime was start to leak since middle of 2007. The market just suddenly realize that most of lenders can not control (contain) the loss. Just like if your bank ask you to pay all your mortgage balance today, you will realize that you are effective broke.
The discussion has been into 1 weeks, a lot of gambler are in the market, it just they take out all the profit, and left all those that believe there is any leadership hang in there, and suddenly realize there is none because of the election.
It will be continued bail out talk, until both side claim they are the true general. At that moment, we probably has pass the worse and in the bottom anyway.
It just to show you that even so call finacial experter can not make sound financial decision.
Jya-NingJya-NingComment
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Loved your title, Beags
Dh and I both laughed at it. Thanks.Comment
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One certainly hopes that people stay calm in the market place. We need to restore some order here and let this be the bottom of the bear market. The question is how low is low. We've seen almost a 4000 point decline in less than 12 months in the Dow. Stay strong as we will need to weather it to get through the dark storm.Comment
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Kind of weird the 777.....someone hit the jackpot."If a Nation expects to be ignorant and free in a state of civilization, it expects what never was and never will be.... If we are to guard against ignorance and remain free, it is the responsibility of every American to be informed."
-- Thomas Jefferson to Col. Yancey, 1816Comment
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DOW plunges 600 below 9000 not good.Comment
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Stocks are still settling as I write, but looks like will settle about 678.91.
It was one year ago today that the dow was at it's highest level, 14,166. Today it finishes at 8582.13. It has dropped 5584 points.DonComment
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The Spare Change Bucket is Empty.
Decided to empty that spare change bucket and make some purchases. If you got any spare change setting around now is the time to invest. Bought both PBG and GE at a 52 week low
and still could have gotten it lower it looks like. Now is not the time to panic, the market will rebound. Now is the time to purchase.
Comment
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Dow plunges more than 678 to fall below 9,000
By TIM PARADIS, AP Business Writer
NEW YORK - Stocks plunged in the final minutes of trading Thursday, sending the Dow Jones industrials down more than 675 points, or more than 7 percent, to their lowest level in five years after a major credit ratings agency said it was considering cutting its rating on General Motors Corp. The Standard & Poor's 500 index also fell more than 7 percent.
The sell-off came as Standard & Poor's Ratings Services put GM and its finance affiliate GMAC LLC under review to see if its rating should be cut. GM has been struggling with weak car sales in North America.
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.
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 led the Dow lower, falling 31 percent, 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 the Fed's recent rate cut.
"Until that starts coming down, you'll be hard-pressed to find anyone getting excited about stocks," Hogan said. "Everything we're seeing his 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."
According to preliminary calculations, the Dow fell 678.91, or 7.3 percent, to 8,579.19. The blue chips hadn't fallen below the 9,000 level since Aug. 6, 2003.
Broader stock indicators also tumbled. The Standard & Poor's 500 index fell 75.02, or 7.6 percent, to 909.92, while the Nasdaq composite index fell 95.21, or 5.47 percent, to 1,645.12.Angela
If you change the way you look at things, the things you look at change.
BTW, I'm still keeping track of how many times you annoy me.
Comment
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Would you like to buy some nice dryships? Less than a week old. Willing to sell for 10% less than I paid for it.Originally posted by SmithfieldTimDecided to empty that spare change bucket and make some purchases. If you got any spare change setting around now is the time to invest. Bought both PBG and GE at a 52 week low and still could have gotten it lower it looks like. Now is not the time to panic, the market will rebound. Now is the time to purchase.
Bought it about $35, now at $19.
DonComment
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Is this still a paper loss?Comment
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i believe we are seeing the great deppression
Comment
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I think that's a little premature. Right now, the stock market is still higher than it was a mere 5 years ago.Originally posted by timeshareseller78 View Posti believe we are seeing the great deppressionComment
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Panic Selling Will Just Continue to Lower the NAV
All Panic sellers are part of the problem.
If I have money in a Mutual Fund and I want to take it out, The Mutual Fund needs to have the money to pay me. If they don't have the cash, they need to sell stocks to get the money to pay me. This just causes more Panic Selling as the NAV goes down.
When will it end?
No one knows.
WaltComment
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Dow Plummets 777 - Henny Penny is Right.
Comment