Post by Nikkol on Oct 6, 2008 13:34:24 GMT -5
Dow falls below 10,000
Blue-chip average falls below the milestone for the first time in nearly 4 years as fears about financial crisis grow.
Last Updated: October 6, 2008: 12:08 PM ET
NEW YORK (CNNMoney.com) -- Stocks tumbled Monday, with the Dow Jones industrial average falling below 10,000 for the first time in nearly four years, as European governments' rush to prop up failing financial firms underscored the global reach of the credit crunch.
Credit markets remained tight, with two key measures of bank jitters hitting an all-time high. Treasurys rallied, lowering the corresponding yields as investors sought safety in government debt. Gold rallied for the same reason. Oil dipped. The dollar was mixed versus other major currencies.
The Dow Jones industrial average (INDU) lost as much as 578 points before pulling back to a 400-point loss, hitting the lowest level during a session since Oct. 25, 2004.
The Standard & Poor's 500 (SPX) index fell 4.3% and the Nasdaq composite (COMP) lost 4.8%.
"We saw a spate of bank rescues in Europe, which is reminding people that this is a global crisis, not just a domestic one," said Todd Salamone, senior VP of research at Schaeffer's Investment Research.
He said investors were also continuing to react to the passage last week of the $700 billion bank rescue bill. He said that initially there was uncertainty about whether the bill would be passed after the House shot down the first version. Now there's uncertainty about how much it will help.
Stocks slumped Friday, as the Wall Street's worst week in seven years ended with President Bush signing the historic $700 billion bailout bill after weeks of contentious debate. The bill involves the Treasury buying bad debt directly from banks in order to get them to start lending to each other again. (Full story)
But the bill won't help loosen up credit markets in the near term, and with cash still scarce, investors remained on edge.
The Federal Reserve attempted to address this Monday by making an additional $300 billion available to banks in return for a broad range of damaged assets. That raises the amount available to banks to $600 billion as of Monday and the Fed could expand that to $900 billion by the end of the year. (Full story)
Underlining the global scope of the market malaise, Germany negotiated on Sunday a $69 billion deal for commercial lender Hypo Real Estate AG. Europe's second-largest economy also guaranteed all private bank accounts.
French BNP Paribas said it would buy 75% of troubled Fortis's Belgium bank after a government bailout failed to reassure investors.
European Union banks are in the process of devising a broader rescue strategy, although they have indicated that it would be on a smaller scale than what was seen in the United States.
Meanwhile in the United States, the battle for Wachovia (WB, Fortune 500) continued, with Wells Fargo (WFC, Fortune 500) and Citigroup (C, Fortune 500) both looking to stake their claims. (Full story)
A measure of investor fear surged, with the CBOE Volatility index (VIX), or the VIX, at a 19-year high.
Salamone said this shows nervousness on a short-term basis is rising, but not enough to signal a stock market bottom is forming. "Fear is getting higher, but it's not at panic levels that have implied major market bottoms in the past," he said.
Credit markets: Measures of bank nervousness remained at elevated levels Monday.
The difference between the 3-month Libor and the Overnight Index Swaps rallied to an all-time high of 2.94% before pulling back. The Libor-OIS spread measures how much cash is available for lending between banks and is used by banks to determine rates. The bigger the spread, the less cash is available.
Libor, the rate banks charge each other to borrow overnight, rose to 2.37%. But 3-month Libor, the rate banks charge each other to borrow for three months, dipped slightly to 4.29% from a nine-month high of 4.33% last January, according to Bloomberg.
The TED spread, which is the difference between 3-month Libor and what the Treasury pays for a 3-month loan, briefly hit an all-time high of 3.93%, before pulling back a bit.
The wider the spread, the more reluctant banks are to lend to each other rather than from the federal government. When markets are fairly calm, banks charge each other premiums that are not much higher than the U.S. government.
The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, fell to 0.39% from 0.49% late Friday, with investors willing to take a slim return on their money rather than risk stocks. Last month, the 3-month bill skidded to a 68-year low around 0%.
Long-term government debt prices gained and the yields slipped. The benchmark 10-year Treasury note rose 1-4/32, lowering the corresponding yield to 3.47% from 3.60% Friday. Treasury prices and yields move in opposite directions.
Company news: eBay (EBAY, Fortune 500) said it was cutting 10% of its workforce, or about 1,000 employees, due to the slowdown. (Full story)
Among other movers, a variety of financial stocks tumbled, including Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500).
Oil and gold: Oil prices were lower, with U.S. light crude oil for November delivery falling $3.83 to $90.05 a barrel on the New York Mercantile Exchange. The contract briefly fell below $90 for the first time since February.
COMEX gold for December delivery rallied $29.30 to $862.50 an ounce.
Other markets: In global trading, European and Asian markets tumbled. Trading on Russia's main market was suspended twice Monday as stocks plummeted.
In currency trading, the dollar gained against the euro and fell versus the yen.
The price of gas decreased for the 19th consecutive day, according to a survey of credit card
Blue-chip average falls below the milestone for the first time in nearly 4 years as fears about financial crisis grow.
Last Updated: October 6, 2008: 12:08 PM ET
NEW YORK (CNNMoney.com) -- Stocks tumbled Monday, with the Dow Jones industrial average falling below 10,000 for the first time in nearly four years, as European governments' rush to prop up failing financial firms underscored the global reach of the credit crunch.
Credit markets remained tight, with two key measures of bank jitters hitting an all-time high. Treasurys rallied, lowering the corresponding yields as investors sought safety in government debt. Gold rallied for the same reason. Oil dipped. The dollar was mixed versus other major currencies.
The Dow Jones industrial average (INDU) lost as much as 578 points before pulling back to a 400-point loss, hitting the lowest level during a session since Oct. 25, 2004.
The Standard & Poor's 500 (SPX) index fell 4.3% and the Nasdaq composite (COMP) lost 4.8%.
"We saw a spate of bank rescues in Europe, which is reminding people that this is a global crisis, not just a domestic one," said Todd Salamone, senior VP of research at Schaeffer's Investment Research.
He said investors were also continuing to react to the passage last week of the $700 billion bank rescue bill. He said that initially there was uncertainty about whether the bill would be passed after the House shot down the first version. Now there's uncertainty about how much it will help.
Stocks slumped Friday, as the Wall Street's worst week in seven years ended with President Bush signing the historic $700 billion bailout bill after weeks of contentious debate. The bill involves the Treasury buying bad debt directly from banks in order to get them to start lending to each other again. (Full story)
But the bill won't help loosen up credit markets in the near term, and with cash still scarce, investors remained on edge.
The Federal Reserve attempted to address this Monday by making an additional $300 billion available to banks in return for a broad range of damaged assets. That raises the amount available to banks to $600 billion as of Monday and the Fed could expand that to $900 billion by the end of the year. (Full story)
Underlining the global scope of the market malaise, Germany negotiated on Sunday a $69 billion deal for commercial lender Hypo Real Estate AG. Europe's second-largest economy also guaranteed all private bank accounts.
French BNP Paribas said it would buy 75% of troubled Fortis's Belgium bank after a government bailout failed to reassure investors.
European Union banks are in the process of devising a broader rescue strategy, although they have indicated that it would be on a smaller scale than what was seen in the United States.
Meanwhile in the United States, the battle for Wachovia (WB, Fortune 500) continued, with Wells Fargo (WFC, Fortune 500) and Citigroup (C, Fortune 500) both looking to stake their claims. (Full story)
A measure of investor fear surged, with the CBOE Volatility index (VIX), or the VIX, at a 19-year high.
Salamone said this shows nervousness on a short-term basis is rising, but not enough to signal a stock market bottom is forming. "Fear is getting higher, but it's not at panic levels that have implied major market bottoms in the past," he said.
Credit markets: Measures of bank nervousness remained at elevated levels Monday.
The difference between the 3-month Libor and the Overnight Index Swaps rallied to an all-time high of 2.94% before pulling back. The Libor-OIS spread measures how much cash is available for lending between banks and is used by banks to determine rates. The bigger the spread, the less cash is available.
Libor, the rate banks charge each other to borrow overnight, rose to 2.37%. But 3-month Libor, the rate banks charge each other to borrow for three months, dipped slightly to 4.29% from a nine-month high of 4.33% last January, according to Bloomberg.
The TED spread, which is the difference between 3-month Libor and what the Treasury pays for a 3-month loan, briefly hit an all-time high of 3.93%, before pulling back a bit.
The wider the spread, the more reluctant banks are to lend to each other rather than from the federal government. When markets are fairly calm, banks charge each other premiums that are not much higher than the U.S. government.
The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, fell to 0.39% from 0.49% late Friday, with investors willing to take a slim return on their money rather than risk stocks. Last month, the 3-month bill skidded to a 68-year low around 0%.
Long-term government debt prices gained and the yields slipped. The benchmark 10-year Treasury note rose 1-4/32, lowering the corresponding yield to 3.47% from 3.60% Friday. Treasury prices and yields move in opposite directions.
Company news: eBay (EBAY, Fortune 500) said it was cutting 10% of its workforce, or about 1,000 employees, due to the slowdown. (Full story)
Among other movers, a variety of financial stocks tumbled, including Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500).
Oil and gold: Oil prices were lower, with U.S. light crude oil for November delivery falling $3.83 to $90.05 a barrel on the New York Mercantile Exchange. The contract briefly fell below $90 for the first time since February.
COMEX gold for December delivery rallied $29.30 to $862.50 an ounce.
Other markets: In global trading, European and Asian markets tumbled. Trading on Russia's main market was suspended twice Monday as stocks plummeted.
In currency trading, the dollar gained against the euro and fell versus the yen.
The price of gas decreased for the 19th consecutive day, according to a survey of credit card
