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| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.633720 |
| Euro to US Dollar | 1.398406 |
| Japanese Yen to US Dollar | 0.010414 |
| Canadian Dollar to US Dollar | 0.861846 |
After a major sell-off in Asia and Europe Monday, U.S. stocks could be headed for an ugly open on Tuesday.
Some analysts believe the Dow Jones industrials may drop substantially at the open. Terry Bedford, a Toronto hedge fund manager, thinks a 400-point drop on the Dow is not out of the question.
Global markets are in a panic, Bedford said Monday.
Futures trading early Tuesday suggested that the Dow could open down as much as 600 points.
U.S. markets were closed Monday for the Martin Luther King Jr. holiday. The Dow closed Friday down 60 points to 12,099. So far in January, the blue-chip index is down 8.8%, the worst start of any year this decade.
The reason for the panic, which continued Tuesday in Asia, appears to be that many investors around the world are terrified that a recession in the United States is coming and may be more severe than most have expected.
And a bad recession in the United States could cause problems with economies that have grown strongly in recent years in part because of rapidly growing exports to the U.S.
"For a world that didn't need the U.S., we sure seem to be affecting them," Howard Silverblatt, an index analyst at Standard & Poor's, said Monday.
Deep selling in Europe and Asia
Monday's selling took the Japan's Nikkei 225 Index ($N225) down 3.9% to 13,326. Tuesday was worse. The Nikkei fell 753 points, or 5.7% to 12,573. In just two days, the index has lost 1,288 points, or 9.3%. It was the biggest two-day loss for the Nikkei in 17 years,Stocks in Sydney and Hong Kong were down 7.3% and 8.6%, respectively, on Tuesday.
Indian stocks fell 10% on the open Tuesday, triggering an automatic trading halt. When trading resumed, the market tumbled to a loss of nearly 15% before rebounding to a loss of 7.5% at 2:15 a.m. ET.
The Shanghai Composite Index, which fell 5.2% on Monday, was off an additional 7.8% Tuesday to 4,534.
On Monday, Germany's Dax Index ($DE:DAX) fell 7.2% to 6,790, and the United Kingdom's FTSE 100 Index ($GB:UKX) was off 5.5% to 5,578.
The French CAC 40 Index ($FR:PX1) was down 6.8% to 4,744.
The FTSE 100 and Dax losses were their worst daily losses since the Sept. 11, 2001 terror attacks.
Crude was slumping in electronic trading. At 2:20 a.m. ET Tuesday, crude in New York was quoted at $87.69, down $2.88 from Friday.
Commodity stocks took some big hits on Monday. Australian mining company BHP Billiton (BHP, news, msgs) saw its shares fall more than 10% in London Monday.
Since its all-time closing high of 14,164 on Oct. 9, the Dow has fallen 14.6%. The Standard & Poor's 500 Index is down 15.3%, and the Nasdaq Composite Index is down 18.2%.
Those aren't the worst of the declines. The Nikkei is down 23% since October. The small-stock-oriented Russell 2000 Index ($RUT.X) is down 21% from its 2007 high on July 13.
Hoping to avoid a recession
The eruption of recession fears accelerated last week when the Bush administration called on Congress to pass a $145 billion economic stimulus package to avoid a recession. The idea also won explicit support from Federal Reserve Chairman Ben Bernanke.The Administration and the Fed both believe the economy has not fallen into a recession yet. Both have forecast that there won't be one in 2008.
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The Fed has been under intense pressure as well to cut interest rates. The central bank is widely expected to cut its key federal funds rate from 4.25% now to 3.75% at its meeting in a week. It will probably cut its discount rate from 4.75% to 4.25% as well.
The fed funds rate is what banks charge each other for overnight loans. The discount rate is what the Fed charges member banks for short-term loans.
In addition, Wall Street is increasingly worried about bond insurers such as Ambac Financial (ABK, news, msgs) and MBIA (MBI, news, msgs). They have been facing downgrades because of problems involving securities backed by subprime-mortgages.
Big earnings this week
When trading opens on Tuesday, the fourth-quarter earnings season kicks into high gear with two Dow components -- DuPont (DD, news, msgs) and Johnson & Johnson (JNJ, news, msgs) -- reporting.Two big banks, Bank of America (BAC, news, msgs) and Wachovia (WB, news, msgs), are also scheduled to issue reports. Bank of America is down 13% this month; Wachovia is down 19%.
In addition, Apple (AAPL, news, msgs) will report after the bell. Apple shares, one of Wall Street's darlings in 2007 with a 133% gain, have taken a big pounding this month, falling more than 18%.
| Most recent close* | Change from closing peak | Date of peak | |
|---|---|---|---|
| Dow Jones Industrial Average | 12,099.30 | -14.58% | Oct. 9 |
| Standard & Poor's 500 Index | 1,325.19 | -15.33% | Oct. 9 |
| Standard & Poor's 100 Index | 620.43 | -14.99% | Oct. 9 |
| Nasdaq Composite Index | 2,340.02 | -18.16% | Oct. 31 |
| Nasdaq-100 Index | 1,844.09 | -17.64% | Oct. 31 |
| Standard & Poor's Midcap 400 Index | 756.21 | -17.55% | Oct. 9 |
| Russell 2000 Index | 673.18 | -21.34% | July 13 |
| Dow Jones Utilities Average | 503.92 | -8.83% | Dec. 10 |
| Dow Jones Transportation Average | 4,179.70 | -14.55% | July 19 |
| Nikkei 225 Index (Japan) | 13,325.94 | -23.67% | Oct. 11 |
| FTSE 100 Index (Britain) | 5,578.20 | -17.12% | Oct. 12 |
| Dax Index (Germany) | 6,790.19 | -15.56% | Oct. 12 |
| * U.S. closes are as of Friday. Japan, U.K., German closes are as of Monday. |
By Charley Blaine, MSN Money
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