Dow closes below 9,000 for first time in 5 years - Mercedes-Benz Forum

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post #1 of 58 (permalink) Old 10-09-2008, 03:00 PM Thread Starter
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Dow closes below 9,000 for first time in 5 years

Dow closes below 9,000 for first time in 5 years

26 minutes ago

Calm gave way to fear in financial markets Thursday, turning a relatively steady day into a rout that pushed the Dow Jones industrials below 9,000 for the first time in five years. Investors, who had begun the day somewhat optimistic that the government was taking extraordinary steps to contain the financial crisis, turned gloomy under an onslaught of worries about the economy and corporations.

On the anniversary of its closing high, the Dow shed more than 7 percent, or almost 700 points, to 8579.19. The Dow has lost 5,585 points, or 39 percent, since closing at 14,198 a year ago. The S&P 500, which also fell more than 7 percent to 909.92, is off 655 points, or 42 percent, since recording its high of 1,565.15 a year ago.

Shares of General Motors Corp., one of the 30 stocks that make up the Dow, tumbled 28 percent to their lowest since 1950.

Credit also remained clogged. The London Interbank Offered Rate — a key benchmark for the loans banks make to each other so that they can lend to businesses and people — rose, signaling that banks remain hesitant to extend credit out of fear they won't be paid back.

Wall Street had begun the day higher on news that the Bush administration is considering taking part ownership in a number of U.S. banks.

The aim of such a move would be to thaw the lending freeze that threatens to push the world's economy into recession. It comes after rampant fear about the global economy sent investors scurrying on Tuesday for safety in U.S. government securities despite an orchestrated round of rate cuts by the world's central banks.

The markets looked set to extend their six day rout another day, though, as they grappled with worries that tight lending would throw the global economy into a recession.

In an effort to show that governments around the world were focusing intently on ways to resolve the crisis, the administration announced that President Bush would meet with finance officials from the Group of Seven major industrial countries at the White House on Saturday.

"The president will have the opportunity to hear directly from the finance ministers about how the financial crisis is affecting their respective economies and the steps they are taking to deal with these challenges both individually and collectively," presidential press secretary Dana Perino told reporters.

Perino said Bush would stress "the importance of nations working in a coordinated way to address the crisis while respecting the different conditions in each economy."

An administration official, who spoke late Tuesday on condition of anonymity because no decision has been made, said the $700 billion rescue package passed by Congress last week allows the Treasury Department to inject fresh capital into financial institutions and get ownership shares in return.

Treasury Secretary Henry Paulson told reporters that Treasury was moving quickly to implement the $700 billion rescue effort and he specifically mentioned reviewing ways to bolster the capital of banks.

"We will use all the tools we've been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size," Paulson said at a Wednesday news conference.

His statements came on the heels of Britain's move to pour cash into troubled banks in exchange for stakes in them — a partial nationalization.

Asked whether he would try something like the British plan, Paulson said: "We have a broad range of authorities and tools. ... We've emphasized the purchase of liquid assets, but we have a broad range of authorities. And I'm confident we have the authorities we need to work with going forward."

The Federal Reserve on Wednesday cut its target for the benchmark rate on overnight loans between banks to 1.5 percent. The cut from 2 percent took the rate to its lowest level in more than four years.

In an unprecedented coordinated move, central banks in England, China, Canada, Sweden and Switzerland and the European Central Bank also cut rates after a series of high-stakes phone calls over several days between Fed Chairman Ben Bernanke and his counterparts.

The Fed acted in concert with the European Central Bank to make emergency interest rate cuts after the Sept. 11 terror attacks in 2001. But Wednesday's cuts were unique in the number of nations that participated, the Fed said.

For millions of Americans, the Fed's cut means borrowing money becomes cheaper. Home equity loans, credit cards and other floating-rate loans all fluctuate depending on what the Fed does.

Bank of America, Wells Fargo and other banks cut their prime rate by half a point to 4.5 percent, also the lowest in more than four years, after the Fed announced its decision early Wednesday.

Fed watchers believe the central bank might cut rates further when it meets later this month, and perhaps again in December, in hopes of cushioning the blow if the United States falls into recession.

Even the coordinated action may not break the fear that has gripped investors across the world as jobs evaporate and retirement savings dry up. Banks may still be inclined to hoard cash, and until they decide to lend again the crisis is not likely to let up.

The government reported Thursday that jobless claims fell by 20,000 to 478,000 last week, within economists' expectations. The claims still remain at elevated levels due to the struggling economy, though.

The Fed's interest rate cut was a change in course. It had held rates steady because of inflation concerns. Since the Fed had put a stop to interest-rate cuts in June, the economic outlook has deteriorated.

"The pace of economic activity has slowed markedly in recent months," the Fed said. "Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit."

Although inflation has been running higher, the Fed believes the recent drop in prices for oil and gas, and the weaker prospects for economic activity, have reduced the threat it poses to the economy.

The credit markets, which have been remarkably tight for weeks, showed only small signs of loosening. Rates on commercial paper, the short-term debt companies issue to raise cash for everyday expenses, went down. But the rate banks charge each other for loans went up.

The Fed also reduced its emergency lending rate to banks by half a percentage point, to 1.75 percent. Given the intense credit crisis, banks have been borrowing more under what is known as the discount window.

Associated Press writers Joe Bel Bruno and Anne D'Innocenzio in New York, Christopher S. Rugaber in Washington and Pan Pylas in London contributed to this report.

Copyright © 2008 The Associated Press.
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post #2 of 58 (permalink) Old 10-09-2008, 03:11 PM
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so, who is guessing it'll dip below 8000, and who says no?

to be honest I'm really hands are tied and if I wanted to sell, it's too late anyway. Anyone think it's time to start buying again yet?

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post #3 of 58 (permalink) Old 10-09-2008, 03:11 PM
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I am not gonna be much of a voice of reason, I think we blew it when we didn't approve Paulson's original plan. I have been saying for close to a year that the FOMC and Treasury have acted in an incompetent manner, always behind the curve, and it's allowed the problems to get worse through lack of action.
I think the problem was set in motion a long time ago with the sub prime foolishness, but then every time they acted they made things worse, the FOMC inflation biased in the face of a slowing economy is the worst culprit, Treasury not defending the dollar is next on the list, the SEC allowing things to get so corrupt is next and the administration bears responsibility in that the SEC is severely underfunded.
How do I square the call for Paulsons plan and calling him an incompetent? Simple, the plan could have been modified to the current plan as we went forward, we needed something at the moment (as was evidenced by the markets reaction to Paulson meeting with the Fed and Key senators that tuesday) and again we waited for nonsense. That delay was the last straw in the crisis of confidence that has brought us down these last 2000 Dow Points.
Nobody wants to put more power in the hands of the current administration less than me, but the way I saw things that tuesday, it was do or die. Now I see it the same way only worse, now we need to nationalize the Money Center Banks in some fashion, or we do not get the credit markets back.
Nobody is buying commercial paper, period, nobody. Unless that changes the Bailout is gonna be useless, if it isn't already doomed. And I don't think a dollar has been spent from the bailout money, so we are looking at what would have happened anyway, with maybe some modicum of positive based on knowing that money is out there. So it could be worse.
We are a representative democracy and we took the power out of the hands of the people we had in place to deal with the situation (and as I said they were less than competent) and put it in the hands of Joe Sixpack and the congress, and we expected good to come of it?

When devils will the blackest sins put on, they do suggest, at first with heavenly shows - Othello
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post #4 of 58 (permalink) Old 10-09-2008, 03:27 PM
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Public sentiment of Wall Street is at an all time low.
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post #5 of 58 (permalink) Old 10-09-2008, 06:38 PM
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I called 8500 back in January and in July [as did FTL]. I am very sorry that it is here but REALLY HOPE that I was correct and that this is a bottom.

Right now I don't have a single piece of data to support an optimistic outcome.


Being smart is knowing the difference, in a sticky situation between a well delivered anecdote and a well delivered antidote - bear.
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post #6 of 58 (permalink) Old 10-09-2008, 06:43 PM
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^ I do.

There will be an election on November 4th, and it looks like we're in for a significant (and positive) change in economic policy shortly thereafter.
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post #7 of 58 (permalink) Old 10-09-2008, 06:53 PM
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Silence I kill you??
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post #8 of 58 (permalink) Old 10-09-2008, 07:40 PM
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Silence I kill you??

One of my all time favorite skits, I rofl every time I see it. My wife doesn't get what i find so humorous.
post #9 of 58 (permalink) Old 10-09-2008, 08:09 PM
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Hey monday I am selling my worthless The Clk Man stock on the BWOT market. Any Takers?
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post #10 of 58 (permalink) Old 10-09-2008, 09:27 PM
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I don't think we are near the bottom yet. We still have the consumer credit debt to content with. As I said last week, you guys may as well save your breath for the screaming. We are only beginning to see the downward spiral, the uncontrollable free fall hasn't even started. That's when you want to scream.

I think we may even hit 6,500 when this is all said and done.

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