As Recession Is Declared, Stocks End Five-Day Rally With Severe Slump
Tuesday, December 2, 2008
NEW YORK, Dec. 1 -- The stock market on Monday suffered one of its worst days since the financial meltdown began, slicing 680 points off the Dow Jones industrial average as Wall Street snapped out of its daydream of a rally and once again faced the harsh reality of a recession.
Not only did stocks end their five-day winning streak, but they erased more than half the gains. The Dow lost 679.95 points to close at 8149.09. There have only been three days in market history with bigger point losses for the Dow -- the Monday after the Sept. 11 attacks, and Sept. 29 and Oct. 15 of this year. The Standard & Poor's 500-stock index, one of the broadest market gauges, lost nearly 9 percent, to close at 816.21.
Erasing any lingering doubts, there was also a declaration that an economic recession has been in progress in the United States since December 2007, made by the National Bureau of Economic Research, the nonprofit group of economists that classifies business cycles.
The selling was broad and deep. All 30 of the stocks in the Dow Jones industrial average finished lower. On the New York Stock Exchange, more than seven stocks fell for every one that rose.
Investors were also nervous after weekend sales figures indicated that many Americans will cut back their trips to the mall this holiday season. Monday brought additional bad news: Manufacturing had dropped to its worst levels in 26 years and construction spending fell by a larger-than-expected amount in October.
Bond prices jumped as investors sought the safety of government debt. The yield on the three-month Treasury bill, considered one of the safest investments, slipped to a very slim 0.03 percent.
The price of oil fell sharply after OPEC decided not to cut production over the weekend and as investors bet slowing economic activity would hurt demand. Light, sweet crude dropped $5.15 to $49.28 a barrel on the New York Mercantile Exchange. The dollar fell against other major currencies. Gold prices also fell.
Citigroup tumbled $1.84, or 22 percent, to $6.45.
Morgan Stanley fell $3.40, or 23 percent, to $11.35.