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Swift, Steep Downturn Crosses Globe
Earlier this month, Taiwan said exports plunged by record levels. In Mexico, the government was forced to intervene in the foreign exchange market after the peso reached an all-time low against the dollar. In China, slumping demand for exports has trimmed the growth of its powerful economy to nearly half its 13 percent pace in 2007.
"Manufacturing, construction, financial services, non-financial, retail -- wherever you look, you see a complete collapse in demand," said Julian Callow, an economist at Barclays Capital in London. "It really is like the floor has come out of confidence in global economic demand."
On Tuesday, the head of the International Monetary Fund urged countries to coordinate their economic stimulus efforts, saying he was "not optimistic" about the world economy.
"Today, the house is burning . . . so we have to act as firefighters," Dominique Strauss-Kahn said on French radio, the Associated Press reported.
In the United States, the sobering news from abroad was coupled with worry about the viability of the auto and banking industry and doubt about just how much the $787 billion stimulus package would be able to revive the economy.
Financial stocks led U.S. markets lower Tuesday, with Bank of America, Citigroup and J.P. Morgan Chase each declining by 12 percent. Also hurting were auto stocks, with executives at General Motors and Chrysler facing deadlines to turn in restructuring plans to the federal government after receiving billions of dollars in bailout funds and seeking billions more. GM's stock was down almost 13 percent.
A report by the Federal Reserve Bank of New York that its general business conditions index in that region fell to a new low of minus-34.7 also weighed down markets.
Also on Tuesday, the Treasury Department released data showing that lending at banks that received government funds had declined.
With all but one of its 30 components finishing in the red, the Dow closed down 297.81 points, or 3.8 percent, to 7552.60, within 300 points of the market bottom reached Oct. 9, 2002, after the bursting of the tech bubble. The lone bright spot was Wal-Mart, whose fourth-quarter profit fell less than expected.
The Standard & Poor's 500-stock index, a broader market measure, closed down 4.6 percent, below the psychologically important 800 mark, causing some traders to predict an avalanche of selling that could test new market lows. The tech-heavy Nasdaq composite index fell 4.2 percent, to 1470.66.