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Wall Street tumbles amid global sell-off

NEW YORK - Wall Street is plunging, with the Dow Jones industrials down more than 500 points amid growing fears that the credit crisis is spreading around the world

Investors are realizing that the Bush administration's $700 billion rescue plan won't work quickly to unfreeze credit markets, and many banks are still having difficulty gaining access to cash. European governments also took steps over the weekend to limit the damage from the growing global financial crisis.

The Federal Reserve also took fresh steps to help ease credit markets Monday.

The Dow is down more than 570 points at the 9,747 level.


Eds: UPDATES trading. Moving on general news and financial services.


AP Business Writer

NEW YORK (AP) — Wall Street tumbled Monday, joining a selloff around the world as fears grew that the financial crisis will cascade through economies globally despite bailout efforts by the U.S. and other governments. The Dow Jones industrials skidded more than 400 points and fell below 10,000 for the first time in four years, while the credit markets remained under strain.

The markets have come to the sobering realization that the Bush administration's $700 billion rescue plan won't work quickly to unfreeze the credit markets, and that many banks are still having difficulty gaining access to cash. That's caused investors to exit stocks and move money into the relative safety of government debt.

Over the weekend, governments across Europe rushed to prop up failing banks. The German government and financial industry agreed on a $68 billion bailout for commercial-property lender Hypo Real Estate Holding AG, while France's BNP Paribas agreed to acquire a 75 percent stake in Fortis's Belgium bank after a government rescue failed.

The governments of Germany, Ireland and Greece also said they would guarantee bank deposits.

The Federal Reserve also took fresh steps to help ease seized-up credit markets. The central bank said Monday it will begin paying interest on commercial banks' reserves and will expand its loan program to squeezed banks.

Investors took a bleak view of the future, seeing no end to the crisis in the near term. But analysts were more optimistic.

"These programs are going to be effective I believe," said Rob Lutts, chief investment officer at Cabot Money Management. "Shorter term we're in a very challenging environment that's going to take a while."

In midmorning trading, the Dow Jones industrial average fell 403.65, or 3.91 percent, to 9,921.73, dropping below 10,000 for the first time since Oct. 29, 2004. At one point, the Dow was down more than 400.

Broader indexes also tumbled. The Standard & Poor's 500 index shed 51.71, or 4.70 percent, to 1,047.52; and the Nasdaq composite index fell 95.83, or 4.92 percent, to 1,851.56. The Russell 2000 index of smaller companies dropped 28.78, or 4.65 percent, to 590.62.

In Asia, the Nikkei 225 closed 4.25 percent lower. Europe's stock markets also declined, with the FTSE-100 down 3.24 percent, Germany's DAX down 5.28 percent, and France's CAC-40 down 5.60 percent.

The anxiety was again obvious in the credit markets. The yield on the three-month Treasury bill slipped to 0.38 percent from 0.50 percent late Friday. Demand for bills remains high because of their safety; investors are willing to take extremely low returns just to have their money in a secure place.

Investors also moved into longer-term Treasury bonds. The yield on the 10-year note fell to 3.52 percent from 3.60 percent late Friday.

Banks' hesitation to lend to one another and to many businesses and individuals is the result of the bad mortgage debt that the financial rescue is supposed to sweep up. But it's still unclear how quickly financial institutions will be able to hand that debt to the U.S. government and convince the markets they are healthy again.

There has been some hope that perhaps the Fed, in concert with other central banks, might cut interest rates to help stimulate the economy. With oil prices well off their midsummer highs and indicators pointing to a slower economy, the Fed's worries about inflation are less than they had been, making it easier to justify a rate cut.

Oil prices fell to an eight-month low below $90 a barrel on speculation that the spreading financial crisis will exacerbate a global economic slowdown and further cut demand for crude oil. Light, sweet crude tumbled $3.82 to $90.06 a barrel on the New York Mercantile Exchange.

Investors might get some indication about a potential rate cut with several policymakers slated to speak this week. Dallas Fed President Richard Fisher and Chicago Fed President Charles Evans will speak on the U.S. economy on Monday. Federal Reserve Chairman Ben Bernanke is due to speak on Tuesday.

Frederick Dickson, chief market strategist at D.A. Davidson & Co., believes investors are eager for any signs about the well being of the economy.

"Wall Street at this point is shifting its attention from whether Congress was going to act on the emergency stabilization bill to the realization that the economy is slowing significantly faster than most analysts had expected," he said. "The downturn has shifted from first gear to about third gear in about two weeks."

In corporate news, ailing Hartford Financial Services Group Inc. received a $2.5 billion investment from European insurer Allianz. Hartford's market value was halved last week on concerns it needed more capital to survive, but shares recovered $4.53, or 16.5 percent, to $31.93 on Monday.

EBay Inc. fell $1.14, or 6 percent, to $17.81 after announcing it will cut about 1,000 jobs, reducing its work force by 10 percent, to streamline the company. The online auction site expects restructuring charges of about $70 million to $80 million, mostly during the fourth quarter.

Wells Fargo & Co. said late Sunday its takeover agreement with Wachovia Corp. will go forward after a state appeals court blocked a lower court ruling that favored rival bidder Citigroup Inc. Wells Fargo said it will "continue working toward the completion of its firm, binding merger agreement" with Wachovia.

Shares of Wells Fargo rose 6 cents to $34.68, while Citi fell 64 cents, or 3.5 percent, to $17.78. Wachovia fell 18 cents, or 2.9 percent, to $6.03.

Eli Lilly & Co. said its board approved an acquisition of ImClone Systems Inc. for more than $6 billion. The deal, which also has been approved by ImClone's board, will create one of the leading oncology franchises in the biopharmaceutical industry. Eli Lilly fell $1.53, or 3.7 percent, to $39.75, while ImClone surged $2.80, or 4.3 percent, to $67.75.

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Added: Oct-6-2008 
By: PiRaTeCoPy
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  • STOP THE PRESSES...You mean that a Government program developed by the same people that got us into this mess, and completely despised by the citizens of this country is not working the way they said it would??? Say it ain't so!!

    I never would have guessed that the US Federal Government was so ineffective, this comes as a shock.

    Posted Oct-6-2008 By 

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  • All ponzi schemes collapse because the number of suckers on the planet is always finite. And when any ponzi scheme collapses, the true value of all the crap sold in the scheme comes to light. The economy of the past ten years was all built on bullshit.

    I always suspected that some shithole apartment in a shithole part of town isn't worth $500,000 just because it's called a "condo" and the county assessors say it's worth $500,000; just so you have to pay monster taxes on it. In More..

    Posted Oct-6-2008 By 

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    • Absolutly.

      Its happening just like my dad said it would.

      Overpriced housing .Bullshit thats only worth half or less of what it is valued at.

      Idiots in the UK borrow 5 - 8 times their income to buy it and the slightest rise in interest rates when it goes up in whole percents and they are fucked with a capital F or if the value of that property drops despite a rise in interest rates then they are also fucked with a capital F or if they lose their jobs they are also fucked with a capital F a More..

      Posted Oct-6-2008 By 

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  • drill drill drill jobs jobs jobs shop american shop american

    Posted Oct-6-2008 By 

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  • This shows you that an Stupid Idiot with an education is just an educated Stupid idiot but they didn't learn you can't fix stupid add the fact their cowards and you have the US congress.

    Posted Oct-6-2008 By 

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  • This is hilarious If you didn't have guaranteed investments as Paulson and his buddies have your screwed. That%u2019s what Paulson is bailing out, company's that don't have the capital to cover these investment, All others suck air including dumbass congressman

    Posted Oct-6-2008 By 

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  • Prepare to defend yourselves.

    After the bailout, banks are still not lending to each other.

    They are in "Slit-Each-Other's-Throats Mode" because banks believe there might not be enough cash for each one of them tomorrow.

    Now, Dow Jones heading towards 4900 (1995 level) from our current 9900 (2008 level) index level is much higher than remote and is a possibility.

    It's back to the 90's economy, men.
    I don't know what you can say to your kids at dinner tables, but this is t More..

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