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| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.662234 |
| Euro to US Dollar | 1.498127 |
| Japanese Yen to US Dollar | 0.011235 |
| Canadian Dollar to US Dollar | 0.947688 |
The stock market crumbled today on worries that the financial rescue plan due for a vote in Congress on Friday won't save the economy from a potentially severe recession.
The Dow Jones industrials closed down about 348 points, or 3.2%, to 10,483. The Standard & Poor's 500 Index was off 47 points, or 4%, to 1,114, and the Nasdaq Composite Index was down 93 points, or 4.5%, to 1,977.
The sell-off cut nearly 72% of Tuesday's 485-point rally and was the second loss of more than 300 points this week alone.
Today was the eighth session in the last 10 with changes of more than 100 points for the Dow. The loss underscores the extreme volatility that has plagued the U.S. stock market this year.
In addition to the House's expected vote on the bailout package Friday, the Labor Department will issue its monthly report on unemployment and job creation. Wall Street expects a disappointing report.
Today's selling was broad, although trading volume wasn't heavy -- just 1.46 billion shares on the New York Stock Exchange. About 2.2 billion shares traded on Nasdaq, about normal.
Only three of the 30 Dow stocks showed gains: JPMorgan Chase (JPM, news, msgs), up 1.2%; Kraft Foods (KFT, news, msgs), up 0.3% to $33.54; and Procter & Gamble (PG, news, msgs), up 0.2% to $71.44. Johnson & Johnson (JNJ, news, msgs) was unchanged at $67.79.
Just 35 S&P 500 stocks and four stocks in the Nasdaq-100 Index ($NDX.X), which tracks the largest Nasdaq stocks, were higher. The Nasdaq-100 was off 73 points, or 4.7%, to 1,491.
Today's losses also reflect the stresses in the global credit markets. The yield on the 13-week Treasury bill was 0.6% today. But the London interbank offered rate, a key rate of what banks charge each other for short-term loans, was 4.2%. The spread between the Treasury and Libor is now 3.6 percentage points; it is normally about a tenth of a percentage point to a half percentage point.
Asian stocks opened lower this evening, with Japan's Nikkei 225 Index ($N225) down 1.6% to 10,976. Stocks in Australia and New Zealand were off 2.6%.
Exporters get pummeled
While financial stocks took their share of the beating today, there was a new theme that emerged in full flower: Export-oriented companies were hit hard because of growing concern among investors and traders that economies in Europe and countries like Brazil, Russia and China are starting to slow down.Among the sectors losing the most today were materials, industrial, energy and technology, with these stocks among the bigger losers:
- Fertilizer maker Mosaic (MOS, news, msgs) fell 41.3% to $39.65 after missing Wall Street estimates with its fiscal-first-quarter earnings. The stock has soared 653% between the end of 2006 and June 18; it has given up 75% of that gain since then.
- IBM (IBM, news, msgs) fell 4.9% to $104.74. That loss reduced the Dow by about 43 points, about 12% of the Dow's total loss. IBM is off 12.3% just this week.
- And mighty Apple (AAPL, news, msgs) was down 8.3% to $100.10 today. The stock is off nearly 50% since peaking at $199.83 on Dec. 28.
The Dow Jones Transportation Average ($DJT) was off 399 points, or 8.7% to 4,177. The transports are often a leading indicator of the economy's prospects. Nineteen of the 20 stocks in the index were lower, with trucking and railroad companies the biggest losers. Con-Way (CNW, news, msgs), one of the nation's largest trucking companies, fell 20.5% to $34.16.
The weakness in transports helped push shares of Cooper Tire & Rubber (CTB, news, msgs) down 7% to $8. A larger problem: Shortages of rubber and other raw materials because of hurricane damage in Texas and Louisiana. Late Wednesday, Cooper reported a second-quarter loss of $22.2 million, or 38 cents per share, down from profit of $17.6 million, or 28 cents per share, last year. The company expects the materials shortages to continue.
Economic worries build
While the Senate approved the government's $700 billion financial rescue plan Wednesday night by a vote of 74 to 25, futures trading immediately signaled investor wariness ahead of the House's second vote on the bill, scheduled for Friday.Worries also persist over the plan's prospects for success, even if it's enacted. Credit markets remain tight, indicating lenders are skeptical. "There's no lending. Most money markets are frozen," Pang Meng Yam, a money market dealer at KBC Bank in Singapore, told Bloomberg News.
Bleak economic reports add to the gloom
Adding to the pressure this morning were two dismal economic reports.Factory orders fell 4% in August, the Commerce Department reported today, more than the 3% decline economists had expected. It was the biggest monthly decline in two years.
Excluding a 9.1% drop in transportation orders, factory orders slumped 3.3%, the biggest drop since September 2001.
Meanwhile, a report on initial jobless claims added to worries about employment. The number of first-time filings for unemployment benefits rose by 1,000 to 497,000 last week, remaining at their highest levels in seven years, the Labor Department reported.
Jobless claims were expected to drop to 475,000 last month.
"Anyone who's wondering if there's a recession should stop wondering," Nigel Gault, U.S. economist for Global Insight, told MarketWatch.com.
On Friday, the Labor Department will release the September jobs report. Economists are expecting a loss of 105,000 jobs last month. The economy has already lost 605,000 jobs through the first eight months of 2008.
"Considering the ongoing stress in the credit markets, these indicators are still likely to get worse before they get better," MKM Partners Chief Economist Michael Darda wrote in a note this morning.
| Thur. | Wed. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $93.97 | $98.53 | -$4.56 | -6.63% | -2.09% |
| Heating oil (per gallon) | $2.7095 | $2.8469 | -$0.1374 | -5.34% | 2.27% |
| Natural gas (per million BTU) | $7.4810 | $7.7280 | -$0.2470 | 0.58% | -0.03% |
| Unleaded gasoline (per gallon) | $2.2550 | $2.3600 | -$0.1050 | -9.24% | -9.47% |
Is crude oil headed to $50?
Merrill Lynch analysts Mark Hume and Alexis Clark think it's possible. And that's one reason why crude oil was down $4.56 a barrel, or 5.6%, to $93.97 a barrel today.Crude oil could plunge to $50 a barrel next year if a global recession takes place, Hume and Clark wrote in a note this morning. Crude is already down 36% since peaking in July.
The analysts wrote that a global recession is "unlikely," but they said that oil prices will be under pressure in the short term because of weakening demand in the U.S. and around the world.
Oil and gas production shares were down sharply this afternoon. Apache (APA, news, msgs) was off 8.9% to $91.26. ExxonMobil (XOM, news, msgs) fell 1.4% to $77.50. The Amex Oil Index ($XOI.X) fell 7.2% to 1,058. The Philadelphia Oil Service Sector Index ($OSX.X)dropped 10.4% to 203.
Buffett: Economy is 'flat on the floor'
Warren Buffett told Charlie Rose on PBS Wednesday night that the U.S. economy is "flat on the floor" after a cardiac arrest."In my adult lifetime I don't think I've ever seen people as fearful, economically, as they are now. The economy is going to be getting worse for a while," Buffett said.
The collapse of the market for mortgage-related securities affected investment firms first, then banks that had bought securities from the investment firms. The failure of a few big banks has now cast doubt on the viability of credit markets around the world, as lenders are paralyzed by fear.
Video on MSN Money
Jubak's Journal: What's Washington's problem?Washington needs to obey the first rule of holes: When you're in one, stop digging. Saying a deal is just around the corner only creates panic when Congress doesn't deliver, says Jim Jubak.
One group hit particularly hard by the crunch is small businesses. An August survey by the National Small Business Association showed that 67% of small businesses said they had been affected directly. And that was before the government takeover of Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs), Lehman Bros. (LEHMQ, news, msgs) filed for bankruptcy, Merrill Lynch (MER, news, msgs) sold itself to Bank of America (BAC, news, msgs) and Washington Mutual failed -- all of which happened in September.
- Top Stocks blog: How Buffett will win in a bailout
GE shares sag after stock offering
Shares of GE fell 9.6% to $22.15 on the day after the conglomerate -- and Dow component -- priced a 548 million stock offering at $22.25 per share. GE had announced the plan to sell shares Wednesday."They were unable to fill the book at a regular price closer to yesterday's close. That discount seems somewhat steep," Jason Small, assistant portfolio manager at Chartwell Investment Partners, told Reuters.
Also on Wednesday, Warren Buffett's Berkshire Hathaway (BRK.A, news, msgs) said it will buy $3 billion in GE perpetual preferred stock. Buffett's investment in GE has a 10% dividend and can't be called for three years. Buffett also gets warrants to buy $3 billion in GE common shares at a strike price of $22.25.
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ECB keeps rates on hold
As expected, the European Central Bank kept interest rates steady at 4.25% this morning.Europe's economic situation looks as bad as that of the U.S., if not worse. On Wednesday markets jumped on a rumor that the European Union would enact a rescue plan similar to that under consideration in the U.S., but that notion was quickly dismissed by Jean-Claude Trichet, head of the European Central Bank.
This morning, Trichet made some cautious statements about the European economy. "The economic outlook is subject to increasing downside risks . . . stemming from ongoing financial market tensions."
SEC extends short-sale ban
The Securities and Exchange Commission late Wednesday moved to extend the ban on short-selling until both houses of Congress approve the government's rescue package.The ban, which had been set to expire today, will now run through the third day after the legislation is approved. President Bush has indicated he will sign the bill immediately.
If the bill doesn't get passed, the ban will expire no later than Oct. 17, the SEC said.
Lilly in talks to buy ImClone
The mysterious ImClone (IMCL, news, msgs) suitor seems to be drug giant Eli Lilly (LLY, news, msgs), according to The Wall Street Journal.Eli Lilly has offered to buy ImClone, maker of the cancer drug Erbitux, for $6.1 billion, or $70 per share, higher than the rival $62-per-share bid from Bristol-Myers Squibb (BMY, news, msgs), the paper reported.
For months, Bristol-Myers has been trying to buy the 83% of ImClone that it does not already own. ImClone CEO Carl Icahn said last week that the company had a bid from an unnamed suitor.
Shares of ImClone closed down 0.4% to $65.10; Lilly shares were down 2.6% to $42.55.
"Eli Lilly would be paying a pretty hefty price tag," Caris & Co. analyst David Moskowitz told Reuters. "I think Bristol will come back and try to make another go at it, so I'm not even sure if Lilly will get it in the end."
| Thur. | Wed. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 0.590% | 0.800% | -0.210 | -34.44% | -81.21% |
| 5-year Treasury note yield | 2.701% | 2.888% | -0.187 | -9.54% | -21.82% |
| 10-year Treasury note yield | 3.646% | 3.768% | -0.122 | -4.73% | -9.64% |
| 30-year Treasury bond yield | 4.154% | 4.248% | -0.094 | -3.51% | -6.84% |
| Currencies | |||||
| U.S. Dollar Index | 80.640 | 79.535 | 1.105 | 1.61% | 5.14% |
| British pound in dollars | $1.7627 | $1.7630 | -0.0003 | -1.11% | -11.39% |
| Dollar in British pounds | £0.5673 | £0.5672 | 0.0001 | 1.12% | 12.85% |
| Euro in dollars | $1.3795 | $1.3808 | -0.0013 | -2.17% | -5.61% |
| Dollar in euros | € 0.7249 | € 0.7242 | 0.0007 | 2.21% | 5.95% |
| Dollar in yen | 105.19 | 105.37 | -0.18 | -0.79% | -5.95% |
| Canadian dollar in U.S. dollars | $0.927 | $0.927 | -$0.0003 | -1.46% | -6.65% |
| U.S. dollar in Canadian dollars | $1.080 | $1.079 | $0.0012 | 1.50% | 7.14% |
| Commodities | |||||
| Gold | $844.30 | $887.30 | -$43.00 | -4.14% | 0.75% |
| Copper | $2.6275 | $2.7895 | -$0.16 | -8.74% | -13.60% |
| Silver | $11.1200 | $12.7700 | -$1.65 | -9.41% | -25.47% |
| Corn | $4.5400 | $4.8400 | -$0.30 | -6.87% | -0.33% |
| Crude oil (NYMEX) (per barrel) | $93.97 | $98.53 | -$4.56 | -6.63% | -2.09% |
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