U.S. Shares Sink Despite Late Rally
Tuesday, October 7, 2008
NEW YORK, Oct. 6 -- The Dow Jones industrial average tumbled along with stock markets around the world Monday, raising fears of a cascading market meltdown as oil prices sank and investors rushed for the safety of government bonds and gold.
The Dow fell a record 800 points before a partial recovery that left the blue chips down 369.88 points for the day, to 9955.50, a decline of 3.6 percent. It was the first time in four years that the Dow slipped below 10,000.
The broader Standard & Poor's 500-stock index fell 3.9 percent, or 42.34, to 1056.89, while the Nasdaq composite index shed 4.3 percent, or 84.43, to 1862.96. Meanwhile, benchmark indexes of British, German and Swedish stocks plunged more than 7 percent, while stocks in Asia, the Middle East and Latin America also moved lower.
"The financial system across the world is being questioned right now," said Gary Wedbush, an executive vice president at the brokerage Wedbush Morgan Securities in Los Angeles.
After a stock market rout in Asia and Europe, an early panic erupted in U.S. trading.
"There's absolutely no industry right now that has bullish sentiment associated with it," said Randy Cass, chief executive of First Coverage, a Boston firm that analyzes stock market recommendations made by brokerages and independent research firms.
Bank of America led the Dow lower, falling 6.6 percent, to $32.22. The stock continued to drop in after-hours trading, following the bank's announcement that it would cut its dividend in half and raise $10 billion to ward off concerns about its access to financing.
"These are the most difficult times for financial institutions that I have experienced in my 39 years in banking," Bank of America chief executive Kenneth D. Lewis said in a statement.
Citing "recessionary conditions" and an outlook for "still weaker economic performance," Lewis said it was "prudent" for the bank to shore up its funding levels.
The worst declines in the Dow on Monday were spread across several industries, with Alcoa, General Motors, Merck, Microsoft, Boeing, Citigroup, McDonald's and Disney all dropping more than 4 percent. Financial stocks including National City, Janus Capital and Lincoln National were among the worst performers in the S&P 500.
Oil prices hit an eight-month low as expectations for a slowing economy implied a coming drop-off in demand for petroleum products. Crude oil for November delivery dropped 6.5 percent, or $6.07, to settle at $87.81 a barrel on the New York Mercantile Exchange.
The concerns about Europe's banking system weakened the euro, extending recent gains in the U.S. dollar and exacerbating the decline in prices for raw materials such as oil, traders said.