WORLD> America
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WORLD> America
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US Stocks dive on belief global recession is at hand
(Agencies)
Updated: 2008-10-24 22:48 The Russell 2000 index of smaller companies fell 13.79, or 2.81 percent, to 476.13. On the New York Stock Exchange, 244 issues advanced while 2,700 declined. Volume came to 416.6 million shares. "There's nothing new going on," said Scott Bleier, president of market advisory service CreateCapital.com. "This is all about the unwinding of massive leverage." Bleier attributed the decline to margin calls and investors in hedge funds and mutual funds cashing out. A margin call occurs when a broker tells an investor to deposit more money into his account because the securities he bought with borrowed money fell to a certain point. When that happens, the investor usually has to sell something else, like stock, to get cash. "Market participants' fear is not that the economy is slowing," he said. "The fear is there is an endless supply of things for sale, regardless of price." Meanwhile, demand for US Treasurys remained high as investors sought safe places to put their money. The three-month bill, regarded as the safest asset around, rose to 0.95 percent from 0.94 percent late Thursday. There were signs that credit markets continue to thaw but are doing so more slowly amid growing economic fears. The rate on three-month loans in dollars -- known as the London Interbank Offered Rate, or Libor -- fell to 3.52 percent from 3.54 percent on Thursday. The rates have fallen steadily for 10 days as confidence in the banking industry has been helped somewhat by government rescue measures. However, the improvements were smaller Friday on widening concerns about the health of the global economy. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.64 from 3.66 percent late Thursday. The U.S. dollar, meanwhile, plunged to a 13-year low, as traders reacted to dismal U.S. jobs data that spurred speculation the Federal Reserve might again cut interest rates. Policymakers are scheduled to announced a decision on interest rates from a scheduled meeting on Wednesday. Meanwhile, gold prices plunged as low as $681 an ounce, the lowest trading level since Jan. 11, 2007. Light, sweet crude fell $3.30 to $64.54 on the New York Mercantile Exchange. The sell-off, another sign that investors fear a severe recession, came despite OPEC's announcement that it will cut production by 1.5 million barrels a day in a bid to shore up sagging prices. Investors had been bracing for a rocky start on Wall Street after futures contracts for the Dow and the S&P 500 fell so low they triggered "circuit breakers," which froze selling until the market's 9:30 a.m. EDT open. That slide raised the possibility that circuit breakers intended to prevent panic selling could be triggered during the regular session -- something that hasn't happened since 1997. The thresholds that would trigger a halt in trading are set at a decline of 10 percent, 20 percent and 30 percent in the Dow, based on where that index was at the beginning of the current quarter; that would mean declines of 1,100 points, 2,200 points and 3,300 points, respectively. The final hour of trading remains a crucial period as well, with many inventors trying to square away their positions at the last minute. In the past few weeks, some of the market's worst volatility has come in the last 30 minutes of the session. Gary Townsend, president and CEO of Hill-Townsend Capital Inc., said a halt in trading was a possibility. "It's a way of smoothing market activity and making it orderly. No one would like to see it," he said. Elsewhere in Asia on Friday, Hong Kong's Hang Seng index fell 8.3 percent. Markets in India, Thailand, Indonesia and the Philippines were also down sharply as investors bailed from emerging markets to cut their exposure to risky assets and meet redemption needs at home. The deepening gloom over growth expectations is having the added effect of putting small economies and currencies under extreme pressure. Investors are pulling money out of countries in Eastern Europe, Latin America and Asia on fears vulnerable countries will not only be hit hard by the financial crisis but may also default on debt. In Europe, for example, Iceland, Hungary, Ukraine and Belarus are all in talks with the IMF to discuss possible loans. |
