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Dow skids more than 500 on profit forecast worries
(Agencies)
Updated: 2008-10-23 06:32 Broader stock indicators also fell Wednesday. The Standard & Poor's 500 index lost 58.27, or 6.10 percent, to 896.78, its lowest close since it finished at 892 on April 21, 2003. The technology-heavy Nasdaq composite index fell 80.93, or 4.77 percent, to 1,615.75. Light trading volume and the Dow's snapback — a rebound in the final 20 minutes that left the blue chips 183 points above the session's low — indicated that the trading was more orderly than it had been two weeks ago when waves of selling pounded the major indexes. "I'm not as concerned about a pullback in the market when you have light volume," said Dave Hinnenkamp, chief executive KDV Wealth Management in Minneapolis. Meanwhile, credit markets showed improvement after virtually freezing up in the past month. Bank-to-bank lending rates fell sharply overnight, indicating that credit is becoming easier to obtain. The London Interbank Offered Rate, or Libor, on three-month loans in dollars fell to 3.54 percent from 3.83 percent, dropping for an eighth straight day. Demand for Treasury bills, regarded as the safest assets around, grew slightly compared to the previous day as economic worries led investors to shun risky assets in favor of government bonds. The three-month Treasury bill yielded 1.01 percent, down from 1.07 percent late Tuesday. The levels are a notable improvement from the 0.20 percent seen last Wednesday, when investors were willing to take the slimmest of returns in exchange for a safe place to keep their money. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.60 percent from 3.74 percent late Tuesday. The dollar was sharply higher against other major currencies, while gold prices fell. "We're making slow progress and confidence is returning but we're still not there yet," said Christopher Cordaro, chief investment officer at RegentAtlantic Capital LLC in Chatham, N.J. He said the latest batch of quarterly results, which cover results through Sept. 30, don't reflect the full brunt of the credit freeze-up felt this month and the nervousness among some consumers following the stock market's swoon. While he expects corporate results will continue to worsen, he also said the markets remain "in panic mode" and investors are perhaps being overly dour in their assessment of how the economy will perform in the next few years. "When you look at the fundamentals of equities around the world, stocks are selling for very cheap prices," he said. "Behaviorally people project today's current bad news much further out into the future than they should." Worries about the global economy helped the dollar. The greenback rose against currencies like the British pound and the euro as investors worried about sluggishness in overseas economies. The strong dollar helped drive down the price of oil, as did a government report that U.S. fuel supplies rose last week. Light, sweet crude fell $5.43 to $66.75 a barrel on the New York Mercantile Exchange, after falling as low as $66.20. While the decline in oil and other commodities can be a welcome sign for consumers and many businesses it can also indicate that investors think economic activity is poised to shrink. Still, Hinnenkamp said the extra money in drivers' wallets compared with when oil was at its high of $147.27 on July 11, could help prop up the economy. Consumer spending accounts for more than two-thirds of U.S. economic activity. |
