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US officially in recession, Dow falls sharply
(Agencies)
Updated: 2008-12-02 06:49 Although Monday's plunge was notable because it cut short a five-day rally, the first such winning streak for the Dow and the Standard & Poor's 500 index since July 2007, it also fit what has become a pattern on Wall Street. The market has made a number of big, optimistic moves higher, including triple-digit gains in the Dow, only to quickly give them back as another batch of bad news arrives. According to preliminary calculations, the Dow Jones industrial average fell 679.95, or 7.70 percent, to 8,149.09. The S&P 500 index dropped 80.03, or 8.93 percent, to 816.21, while the Nasdaq composite index fell 137.50, or 8.95 percent, to 1,398.07. Only 218 stocks were in positive territory on the New York Stock Exchange with 2,693 declining. Volume came to 1.62 billion shares. The Russell 2000 index of smaller companies fell 56.07, or 11.85 percent, to 417.07. Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.76 percent from 2.92 percent Friday. The yield on the three-month T-bill, considered one of the safest investments and an indicator of investor sentiment, slipped to 0.02 percent from 0.05 percent Friday. The lower the yield, the more anxious investors tend to be. The market received no relief after a pair of speeches from Paulson and Bernanke about the economy. Paulson said the administration is looking for more ways to tap a $700 billion financial rescue program and will consult with Congress and the incoming Obama administration. The program has distributed $150 billion out of the $250 billion earmarked to buy stock in banks as a way to boost their resources so they can lend more. He said the administration is looking at other ways to utilize the rescue package, including alternatives for providing capital to financial institutions. Meanwhile, Bernanke said in another speech Monday that further interest rate cuts are "certainly feasible," but he warned there are limits to how much such action would revive the economy. The central bank's key interest rate now stands at 1 percent, a level seen only once before in the last half-century. Many economists predict policymakers will drop the rate again at their next meeting on Dec. 15-16. And, there have certainly been enough weak economic news to compel the Fed to make another cut. There was no shortage of disappointing economic news on Monday. The Institute for Supply Management, a trade group of purchasing executives, said its index of manufacturing activity fell to a 26-year low in November. Meanwhile, the Commerce Department said construction spending fell by a larger-than-expected amount in October. Stanfield also said investors have lost some confidence in recent moves by the government to bolster the financial system. "The financials are still lagging, which in my opinion shows a lack of confidence in (Treasury Secretary) Paulson and the undertaking of the Fed and the Treasury," he said. Analysts say investors have been frustrated by the government's change in strategy as it implements its $700 billion financial bailout program; the Treasury originally said it would buy soured mortgage debt from banks, then decided to buy stock in the banks. Last week, with the rescue of Citigroup Inc., the government again said it was buying the bank's failed debt. The government injected a fresh $20 billion into the banking giant and said it would guarantee up to $306 billion of the bank's risky assets. Banking stocks were among the biggest sectors pulling the overall market down on Monday. Citigroup tumbled $1.84, or 22.2 percent, to $6.45. Morgan Stanley shares dropped $3.40, or 23.1 percent, to $11.35. Goldman Sachs Group Inc. fell $13.23, or 16.7 percent, to $65.76. Retailers were among the day's poorest performers. Wal-Mart Stores Inc. fell $2.87, or 5.1 percent, to $53.01, while JCPenney Co. tumbled $2.44, or 12.8 percent, to $16.55. Light, sweet crude dropped $5.15 to settle at $49.28 a barrel on the New York Mercantile Exchange after OPEC decided not to cut production at an informal meeting in Cairo on Saturday. The Organization of the Petroleum Exporting Countries, which accounts for about 40 percent of global supply, reduced output quotas in October by 1.5 million barrels a day. The dollar fell against other major currencies. Gold prices also fell. Overseas, Japan's Nikkei stock average fell 1.35 percent. At the close, Britain's FTSE 100 was down 5.19 percent, Germany's DAX index was down 5.88 percent, and France's CAC-40 was down 5.59 percent. (For more biz stories, please visit Industries)
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