WORLD> America
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WORLD> America
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Dow sinks 514 on louder warnings of a recession
(Agencies)
Updated: 2008-10-23 10:15 For many US companies, the damage has already begun. Wachovia, which is being bought by Wells Fargo for about $14 billion in stock, said it lost $23.89 billion in the third quarter, down from earnings of $1.62 billion a year ago. Boeing reported its earnings slumped 38 percent as a strike halted production of commercial jets. Merck & Co. said it will slash 7,200 jobs as part of a new restructuring program. The drugmaker's third-quarter profit plunged 28 percent, partly due to flat sales. Earnings also fell at paper company Kimberly-Clark Corp., insurer WellPoint Inc. and drug developer Wyeth.
"We are going into what is very clearly a recession mode," Blake Jorgensen, Yahoo's chief financial officer, said in a Tuesday interview. Yahoo is slashing 1,500 jobs while it prepares for a deep downturn likely to extend well into 2009. "Right now we have 9 million Americans out of work. That's up from 6 million this time last year, and to every trader on the floor, to every trader upstairs, that's the most important number" because consumer spending makes up two-thirds of the economy, said Alan Valdes, vice president of trading firm Hillard and Lyons. The official arbiter of recessions, the nonpartisan National Bureau of Economic Research, has not called the current downturn a recession. Credit markets have showed some signs of a thaw. Yields on Treasury bills and the interest rates banks charge each other have both fallen back to late-September levels. Bank-to-bank lending rates fell sharply overnight.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. Libor is important because many mortgage and credit card rates are pegged to it and it's a good barometer of banks' willingness to lend. Despite declining rates, the volume of loans remained weak. Meanwhile, members of Congress are moving forward with efforts to overhaul the regulatory system. The changes could be the most sweeping since the 1930s, when Congress revamped how the financial system was regulated in response to the 1929 stock market crash and a wave of bank failures. Democrats in Congress are also pushing efforts to assemble a second economic stimulus program that could total $150 billion or more. On Monday, Fed Chairman Ben Bernanke said a "significant" stimulus package is appropriate. The White House has yet to endorse the idea, but has said President Bush was at least willing to consider a second stimulus measure. |
