By Renae Merle
Washington Post Staff Writer
Thursday, November 20, 2008
Stocks plummeted yesterday, sending the Dow Jones industrial average to a five-year low after poor economic data were compounded by gloomy pronouncements by the Federal Reserve.
The Dow fell 427.47 points, or 5.07 percent, to finish the session at 7997.28, closing below 8000 for the first time since 2003, a technical barrier that dashed investors' hopes that the worst of the market sell-offs were finished. The Standard & Poor's 500-stock index also hit a five-year low, falling 52.54 points, or 6.12 percent, to 806.58.
The tech-heavy Nasdaq composite index plunged 96.85 points, or 6.53 percent, to close at 1386.42 after reports that Microsoft is no longer interested in buying Yahoo. Yahoo's stock fell 20.9 percent to $9.14 a share, while Microsoft fell 6.8 percent to $18.29 a share. The sell-off moved on to Asia today as stocks in Japan fell nearly 6 percent in early trading.
The market was weak throughout the day, but in what has become a common occurrence, stocks slid significantly during the last hour of trading. The sell-off followed the release of minutes from the Federal Reserve's last meeting, which showed its leaders expect economic conditions to worsen sharply next year.
"If the Fed released bad news, people are always going to sell," said Adam Birzgalis, a senior broker at LaSalle Futures in Chicago.
The financial sector took the brunt of the losses. Citigroup dropped 23.4 percent to $6.40 a share, while Bank of America fell 14 percent to close at $13.06 a share.
Stocks were also weighed down yesterday by more evidence of economic weakness. Consumer prices fell by 1 percent last month, according to Labor Department data. That was the largest one-month decline on record and exceeded analysts' expectations. Meanwhile, construction of new homes plunged 4.5 percent last month to an annual rate of 791,000 units, the lowest level on record.
"Housing activity seems to have taken another hit since the stock market plunge, along with most of the rest of the economy," Ian Shepherdson, chief U.S. economist for High Frequency Economics, said in a research note.
With the chances of a bailout for Detroit's Big Three dimming, auto stocks also fell. The chief executives of General Motors, Ford and Chrysler warned a House committee yesterday that without the $25 billion in emergency loans they are seeking, the companies could collapse, but they were met by resistance from congressional Republicans.
GM, which has said it could run out of money next year, and Ford were down 9.7 percent and 25 percent, respectively. Chrysler is privately held.
Crude oil prices fell 1.4 percent to $53.62 a barrel.