WORLD> America
|
WORLD> America
|
|
US Stocks dive on belief global recession is at hand
(Agencies)
Updated: 2008-10-24 22:48 NEW YORK -- Wall Street joined world stock markets in a sharp selloff Friday, with the Dow Jones industrials dropping nearly 300 points in early trading and all the major indexes falling more than 4 percent. The growing belief that the world will suffer a punishing economic recession has investors dumping stocks. The pullback in the US wasn't as steep as some on Wall Street had feared given the massive declines seen overseas after another round of grim news about the world's economy and after selling in index futures before the market opened was so intense that trading halts were imposed. In Japan, shares of Sony sank more than 14 percent after it slashed its earnings forecast for the fiscal year. In Germany, Daimler's stock dropped 11.4 percent after it reported lower third-quarter earnings and abandoned its 2008 profit and revenue guidance.
Japan's Nikkei stock average fell a staggering 9.60 percent. In Europe, Germany's benchmark DAX index was down 7.1 percent, France's CAC40 dropped 5.7 percent while Britain's FTSE 100 sank 6.8 percent after the government said its gross domestic product fell 0.5 percent in the third quarter, putting the country on the brink of recession. The dour outlook convinced investors that the world economy is headed for a severe downturn despite a raft of government rescue efforts aimed at pulling the financial system from the brink. It also indicated that the tremors caused by the global credit crisis may have only begun to be felt in their true scope and magnitude.
"There's a lot of panic out there today," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York. "People have been saying that we're in a recession. This is the realization." Fearing more carnage in world equity markets, big hedge funds and other institutional investors have been pulling out their money en masse in a bid to reduce risk and raise cash -- a process known as deleveraging that only intensifies the selling. Meanwhile, individual investors that have seen their holdings decimated in recent weeks have been yanking money out of mutual funds, adding to the downward pressure on markets. "I think it would be natural to make an assumption that there are some funds in trouble and that we may see some funds shut down," Fullman said. Investors appeared briefly comforted after a real estate trade group said sales of existing homes rose by the largest amount in more than five years in September. The National Association of Realtors said Friday that sales of existing homes rose by 5.5 percent in September compared to August, the biggest jump since a 5.6 percent increase in July 2003. Prices continued to fall, however. The median sales price has dropped to $191,600, down by 9 percent from a year ago. But that report was overwhelmed by the market's increasing anxiety. In late morning trading, the Dow fell 293.34, or 3.38 percent, to 8,397.91 after falling 500 soon after the opening bell. Still, the blue chips remained above the 8,000 level; at its recent low of Oct. 10, the Dow traded as low as 7,882.51. The Dow hasn't closed below that level since March 31, 2003, when it ended at 7,992.13. Broader stock indicators also tumbled. The S&P 500 index fell 30.93, or 3.41 percent, to 877.18, and the Nasdaq composite index fell 40.72, or 2.54 percent, to 1,563.19. |
|||||
