Wall Street surrendered almost all of its furious gains from Monday as investor pessimism about a declining economy sent the Dow Jones Industrials down 733 points, or eight percent, to 8,578. Thursday, stock markets in the Asia-Pacific region are plunging again, following Wednesday's sell-off on Wall Street VOA's Barry Wood has more.
It was the second biggest point drop ever for the Dow average, which is just about where it was before its huge rally on Monday. Other indexes dropped even more. The Standard and Poors index of 500 stocks fell nine percent, its worst performance since the stock market crash of 1987. The Nasdaq index was down nearly nine percent.
The impetus for the sell off was a report that U.S. retail sales fell by over one percent in September, a figure that was twice as bad as what analysts were expecting. It was the third consecutive month of declining retail sales and a sign that the economy may already be in recession.
Federal Reserve Board Chairman Ben Bernanke told a New York audience that the financial crisis will have an economic effect and that time will be needed for a full recovery. Bernanke said the Fed will do all it can to stabilize the economy, which has been caught in a severe credit crisis for 14 months. The Federal Reserve chairman rejected any comparison of the present situation with the great depression of the 1930s. A student of economic history, Bernanke said the authorities have avoided the errors that turned a 1929 downturn into a depression. The errors were a restrictive or deflationary monetary policy and inaction that allowed the banking system to collapse.
"First of all, monetary policy has been proactive and aggressive," Bernanke said. "We moved early and quickly to try to stabilize the system and offset the pressures created by the credit markets. And secondly, we didn't wait for three and a half years as the financial market collapsed to take action and strong action to stabilize the financial system."
Separately, Janet Yellen, the head of the Federal Reserve Bank of San Francisco, said it appears the economy is in recession.
Oil continued to fall, losing $4 to under $75 a barrel. Oil has fallen by nearly 50 percent from its July high and is at its lowest level in 15 months. Gold was steady at $839 an ounce and the dollar was higher against the euro.
