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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 |
Stocks fell to their lowest levels in five years today as fears grew about the global banking system's ability to survive the worst credit crunch since at least World War II.
The Dow Jones industrials fell 508 points, or 5.1%, to 9,447. The Nasdaq Composite Index fell 108 points, or 5.8%, to 1,755, and the Standard & Poor's 500 Index was off 61 points, or 5.7%, to 996.
Today's close was the Dow's lowest since Oct. 2, 2003; it's down about one-third since peaking a year ago.
The Nasdaq's close was its worst since August 18, 2003, and the S&P's decline was its worst -- and its first close under 1,000 -- since Sept. 30, 2003.
The Dow has lost nearly 880 points, or 8.5%, this week alone and is off 12.9% so far in October. The S&P 500 is off 9.4% this week and 14.5% on the month. The Nasdaq has shed 9.9% this week and 15.7% for the month.
Crude oil finished up $2.25 to $90.06 a barrel. But it's down nearly 39% from peaks in July.
To show how frightened even sophisticated investors are, the CBOE Volatility Index ($VIX.X), which measures the ratio of put options (options to sell stocks) to call options (options to buy stocks), closed a record 53.68 today. The higher the ratio, the greater the fear.
History suggests some good news in that number. Peaks in the volatility index suggest could be a signal that a sharp rebound is near. When it will occur and how long it will last is anyone's guess.
Weak earnings from Alcoa (AA, news, msgs) won't improve moods on Wall Street.
More important to watch is how U.S. markets react to a huge sell-off in Japan and weak markets in Asia. The Nikkei 255 Index ($N225) fell 953 points, or 9.8%, to 9,203, its biggest one-day percentage drop since 1987.
In addition, European stocks were expected to open sharply lower after Britain announced an $87 billion rescue plan for its banking system.
Futures trading in U.S. stock indexes suggest the Dow may open down roughly 120 points lower from today's close, with the S&P 500 and the Nasdaq-100 Index ($NDX.X), which tracks the largest Nasdaq stocks, down 20 points each.
'Nobody trusts anybody'
The market's plunge in the last year started with the collapse of the housing and mortgage markets. But it has metastasized into something very dangerous that is threatening to stop the U.S. economy in its track.Home prices are falling in many markets. Approval rates for car loans have dropped sharply. Businesses are having problems getting capital for expansion, and investors are watching their savings in 401(k) retirement plans dwindle away.
Today's battering came as Federal Reserve Chairman Ben Bernanke signaled that the central bank will cut its key interest rates soon, likely by the end of the month.
But investors mostly ignored that signal, which Bernanke offered in a speech this afternoon, focusing instead on his rather gloomy economic outlook. The credit crisis, which has made banks reluctant to lend, is stifling the ability of many businesses to fund their daily operations and menacing overall growth, Bernanke told the National Association of Business Economics. It's a far bigger problem than inflation.
"Nobody trusts anybody right now," Ryan Detrick, an analyst at Schaeffer’s Investment Research, told The New York Times. "No one’s lending to each other."
There were worries about whether the automobile industry will start to recover in 2010. Ford Motor (F, news, msgs) fell 20.9% to $2.92; General Motors (GM, news, msgs) was off 10.9% to $7.56.
Investors battered shares of Bank of America (BAC, news, msgs) after the company cut its dividend in half late Monday and was forced to cut the price of a stock offering designed to raise $10 billion. The offering was to be priced on Wednesday morning and looked like it would come in at $22 to $23.
Bank of America slumped 26.2% to $23.77 and was by the far the worst Dow performer.
Merrill Lynch (MER, news, msgs), which is being absorbed by Bank of America, was also down 25% to $18. Morgan Stanley (MS, news, msgs) was off 24.9% to $17.65, despite repeated assurances that it's about to seal a deal for Mitsubishi UFJ Financial Group to buy up to 24.9% of the investment house.
With today's losses, the Dow has fallen 33.3% from its Oct. 9, 2007, peak and the S&P 500 is down 36.4%. The Nasdaq is off 38.6% from its peak last Oct. 31 and the Russell 2000 Index ($RUT.X) is off 34.7% from its high on July 13, 2007.
| Tuesday | Change from closing peak | Date of peak | |
|---|---|---|---|
Dow Jones Industrial Average | 9,447.11 | -33.30% | Oct. 9, 2007 |
S&P 500 Index | 996.23 | -36.35% | Oct. 9, 2007 |
S&P 100 Index | 473.61 | -35.10% | Oct. 9, 2007 |
Nasdaq Composite Index | 1,754.88 | -38.62% | Oct. 31, 2007 |
Nasdaq-100 Index | 1,329.98 | -40.60% | Oct. 31, 2007 |
S&P Midcap 400 Index | 598.61 | -34.73% | Oct. 9, 2007 |
Russell 2000 Index | 558.95 | -34.68% | July 13, 2007 |
Dow Jones Utilities Average | 376.69 | -31.85% | Dec. 10, 2007 |
Dow Jones Transportation Average | 3,898.15 | -29.03% | June 5, 2008 |
Nikkei 225 Index (Japan) | 10,155.90 | -41.83% | Oct. 11, 2007 |
FTSE 100 Index (Britain) | 4,605.22 | -31.58% | Oct. 12, 2007 |
Dax Index (Germany) | 5,326.63 | -33.76% | Oct. 12, 2007 |
A worsening global crisis
As difficult as markets were in the U.S., Asian and European markets may face a tougher day on Wednesday.Britain is reportedly preparing a rescue package for British banks struggling under seized-up credit markets, its biggest step yet to stem turmoil in financial markets, Bloomberg News reported.
Iceland was seeking a $5.4 billion emergency loan from Russia, had pegged its currency to an index and had taken control of one of its largest banks. Iceland's banks expanded so fast after being privatized eight years ago that they now have debt 12 times the size of its economy.
But what prominent money managers really wanted to see today -- a coordinated response to the credit crisis by central banks around the world -- didn't happen, despite rumors in markets around the world that a coordinated move was imminent.
European leaders met over the weekend in a spirit of solidarity but couldn't come up with a Europe-wide package along the lines of the U.S. government's $700 billion rescue plan for the financial markets, a bill President Bush signed into law Friday.
"In the absence of any constructive and meaningful news out of any recognized fiscal, financial or monetary authority, the market is staying on track for self-destruction," Peter Kenny, managing director at Knight Equity Markets, told Reuters.
| Tues. | Mon. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $90.06 | $87.81 | $2.25 | -10.51% | -6.17% |
| Heating oil (per gallon) | $2.5057 | $2.4740 | $0.0317 | -12.46% | -5.42% |
| Natural gas (per million BTU) | $6.7680 | $6.8350 | -$0.0670 | -9.01% | -9.55% |
| Unleaded gasoline (per gallon) | $2.0628 | $2.0591 | $0.0037 | -16.98% | -17.18% |
Nobody is spared
Most of Wall Street's attention focused today on the health of the financial system and whether problems are broadening beyond banks and investment firms to insurance companies and real estate investment trusts.But few areas of the market were spared from the selling. Among other things, mutual funds are getting hit with redemption orders from investors scared by the markets.
"You've still got a huge confidence problem out there among the average investor," said Chris Conefry, a trader with MadisonPropTrading.
All 30 stocks in the Dow showed losses on the day, along with 482 S&P 500 stocks and 98 Nasdaq-100 stocks.
Stocks that appear to be vulnerable to a weakening economy overall were hit, including technology. Apple (AAPL, news, msgs) fell 9.2% to $89.16. Google (GOOG, news, msgs) was down 6.8% to $346.01.
Target (TGT, news, msgs) dropped 5.9% to $39.86. Home builder Lennar (LEN, news, msgs) fell 12.9% to $10.44.
Investors sought safety, buying gold and Treasury bills and consumer staple stocks -- which don't provide big gains in a hot market and don't fall apart in a bear market. Kimberly-Clark (KMB, news, msgs), which makes paper products, was down 1.8% to $61.35.
Alcoa kicks off an ugly earnings season
Aluminum giant and Dow component Alcoa (AA, news, msgs) unofficially started third-quarter earnings season today after the closing bell, and investors weren't happy.The company earned $268 million, or 33 cents a share, down from $555 million, or 63 cents a share, a year ago.
Analysts had expected 54 cents per share for Alcoa. Alcoa was off 7.7% to $16.71 in regular New York Stock Exchange trading and fell an additional 4.8% to $15.91 in after-hours trading. The company cited softening demand, higher costs and sharply lower aluminum prices.
Thomson Reuters sees a dismal season for the S&P broadly.
"The estimated growth rate for Q3 2008 stands at -4.8%," the company said. "On April 1, the estimated growth rate for Q3 2008 was 17.3%. On July 1, the estimated growth rate was 12.6%. If the final growth rate for Q3 2008 is -4.8%, it will mark the first time the S&P 500 has recorded five consecutive quarters of negative earnings growth since Q1 2001 -- Q2 2002."
A move to free up the commercial paper market
The Fed said this morning that it will set up a program to buy the three-month unsecured and asset-backed commercial paper, the central bank's latest bid to relieve credit markets.Commercial paper is a short-term IOU issued by a large company to fund day-to-day operations.
The market seized up after the collapse of investment house Lehman Bros. The Federal Reserve said the volume of commercial paper outstanding has shrunk by $200 billion, or 11.1%, to $1.6 trillion over the last three reporting weeks alone.
Andy Rosenbaum contributed to this report.
| Tues. | Mon. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
Treasurys | |||||
13-week Treasury bill | 0.785% | 0.410% | 0.375 | -12.78% | -75.00% |
5-year Treasury note yield | 2.479% | 2.395% | 0.084 | -16.98% | -28.25% |
10-year Treasury note yield | 3.506% | 3.426% | 0.080 | -8.39% | -13.11% |
30-year Treasury bond yield | 4.027% | 3.942% | 0.085 | -6.46% | -9.69% |
Currencies | |||||
U.S. Dollar Index | 81.380 | 81.950 | -0.570 | 2.55% | 6.11% |
British pound in dollars | $1.7467 | $1.7452 | 0.0015 | -2.01% | -12.19% |
Dollar in British pounds | £0.5725 | £0.5730 | -0.0005 | 2.05% | 13.89% |
Euro in dollars | $1.3604 | $1.3486 | 0.0117 | -3.52% | -6.92% |
Dollar in euros | € 0.7351 | € 0.7415 | -0.0064 | 3.65% | 7.44% |
Dollar in yen | 101.32 | 101.49 | -0.17 | -4.44% | -9.41% |
Canadian dollar in U.S. dollars | $0.907 | $0.907 | -$0.0001 | -3.62% | -8.69% |
U.S. dollar in Canadian dollars | $1.104 | $1.103 | $0.0007 | 3.75% | 9.51% |
Commodities | |||||
Gold | $882.00 | $866.20 | $15.80 | 0.14% | 5.25% |
Copper | $2.5345 | $2.4930 | $0.04 | -11.97% | -16.66% |
Silver | $11.3800 | $11.2850 | $0.10 | -7.29% | -23.73% |
Corn | $4.1700 | $4.2400 | -$0.07 | -14.46% | -8.45% |
Crude oil (NYMEX) (per barrel) | $90.06 | $87.81 | $2.25 | -10.51% | -6.17% |
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