Bleak Friday On Wall Street

Stocks Plunge More Than 360 Points On 20th Anniversary Of Black Monday

(CBS/AP)  It wasn't a “Black Monday,” but it was certainly a Gray Friday.

The Dow Jones industrial average dropped more than 360 points Friday - the anniversary of the Black Monday crash 20 year ago - as renewed credit concerns, lackluster corporate earnings, and rising oil prices spooked investors.

Stocks tumbled after three corporate heavyweights - 3M Co., Honeywell Inc., and Caterpillar Inc. - reported disappointing earnings. At the same time, oil jumped to $90 dollars a barrel for the first time ever before settling down at a little over $88.

“I've never seen a rally, a spike in oil prices, that is based solely on the possibility of something going wrong rather than something fundamental,” energy trader Eric Bolling told CBS News correspondent Kelly Wallace.

The market turned sharply lower in late afternoon when Standard & Poor's again reduced its ratings on residential mortgage-backed securities. The latest reduction, on more than 1,400 types of securities, added to investors’ unease about credit quality.

In one bright spot, Google Inc. reported stronger-than-expected profits, drawing a number of analyst upgrades.

“We've got a multitude of earnings that are less than optimal in spaces outside the financials,” said Art Hogan, chief market strategist at Jefferies & Co. “Investors are starting to get concerned about both the pace of the U.S. economy and the pace of earnings growth.”

In the final hour of trading, the Dow Jones industrial average fell 354.26, or 2.55 percent, to 13,534.70. The Dow is down for the fifth straight session.

For the week, the Dow dropped more than 580 points since opening bell on Monday.

“I was not surprised there was some correction, given our expectation that earnings growth was going to fall short of expectations,” said Alan Gayle, senior investment strategist, director of asset allocation for Trusco Capital Management.

“I think stock analysts were slow to incorporate the impact of the subprime crisis on third-quarter earnings,” he added.

Broader stock indicators also fell. The Standard & Poor's 500 index fell 39.45, or 2.56 percent, to 1,500.63, and the Nasdaq composite index dropped 74.15, or 2.65 percent, to 2,725.16. The Nasdaq fell below the noteworthy technical level of 2,750, adding to selling pressure.

Friday's pullback pales in comparison to what traders on the floor of the New York Stock Exchange had to contend with 20 years ago. On Oct. 19, 1987 - Black Monday - the Dow plunged 23 percent amid concerns about interest rates and slowing economic growth. A decline of similar proportion given the market's current levels would mean a drop of some 3,000 points.

The volatility comes on a dramatic anniversary... 20 years to the day since the crash of 1987. Could it happen again?

“We could always have another crash,” stock market analyst Elaine Garzarelli told Wallace. “Human emotions are the determining factor, and there's a lot of exuberance and greed out there.”

There are similarities to '87... surging oil prices, a weak dollar, and volatility in the markets. But there are big differences too, analysts say.

To equal the 500 point, 23% percent drop in the Dow back on Black Monday, today the Dow would have to plummet by 3,200 points.

“The world economy is in much better shape than it was then,” Bolling said. “Twenty years ago, we sneezed and the rest of the world caught a cold. It's not like that anymore; it's a world, global economy.”

Still, Wall Street's nervous. The bursting of the housing bubble and a credit crunch have some whispering the R-word: Recession.

Bonds prices rose again Friday, extending a rally to an unusual five sessions. The yield on the benchmark 10-year Treasury note, which moves inversely to the price, fell to 4.39 percent from 4.50 percent late Thursday. The dollar was mixed against other major currencies, while gold prices fell.

After touching $90.02 overnight, light, sweet crude fell 86 cents to $88.61 on the New York Mercantile Exchange. Part of oil's run-up this week owes to continued worries over tensions between Turkey and Kurdish rebels in northern Iraq. Investors are concerned a conflict could disrupt supplies through Turkey, an important oil hub.

The rise in crude prices has also attracted investors looking for a hedge against the weakening U.S. dollar. The greenback fell to a new low against the euro Thursday.

Hogan noted that for much of the week investors focused on results from banks, which saw profits drop on souring mortgage loans and tight credit markets. But seeing weakness Friday in industrial company earnings reports increased their nervousness.

“We've got a change in concern,” Hogan said, referring to results from industrial companies like Honeywell and Caterpillar. “That gives us a great deal of pause.”

3M, the maker of Scotch tape and Post-It Notes, said quarterly profit jumped 7 percent on strong growth across all regions, but sales missed expectations. The company raised its profit outlook for the full year. But the company announced plans to cut prices on its profitable films for LCD television screens. The stock fell $7.93, or 8.4 percent, to $86.80.

Honeywell International Inc., the diversified manufacturer, turned in a 14 percent increase in its third-quarter earnings. The company raised its forecast for full-year earnings to the high end of its previously targeted range. An analyst, however, described profit margins at the company's transportation and automation and controls segments as disappointing. The stock declined $2.24, or 3.7 percent, to $58.45.

Caterpillar, one of the world's largest construction equipment makers, fell $4.41, or 5.7 percent, to $73.25 after its third-quarter earnings rose 21 percent but fell short of Wall Street's expectations. In addition, the company lowered its full-year forecast.

Wachovia Corp. fell $1.55, or 3.2 percent, to $46.58 after reporting third-quarter profits fell 10 percent due to write-downs related to difficult credit market conditions. The nation's fourth largest bank signaled increasing credit troubles ahead and said there would be staff cuts.

Google rose $4.56 to $644.18 after the search engine leader said advertising spending lifted third-quarter profit by 46 percent.

Declining issues outnumbered advancers by about 5 to 1 on the New York Stock Exchange, where volume came to 1.56 billion shares.

The Russell 2000 index of smaller companies fell 23.71, or 2.87 percent, to 801.32.

Overseas, Japan's Nikkei stock average closed down 1.71 percent. Britain's FTSE 100 fell 1.23 percent, Germany's DAX index fell 0.47 percent, and France's CAC-40 fell 0.46 percent.

[tnt1954]

its an inflationary depression. like they
had in argentina. you go into get a loaf
of bread and by the time you get to the checkstand
its gone up 500%. now that''s inflation.

[tnt1954]

retreat, regroup, reorganize. the three r''s.
rest, romp and recreate. the three r''s.
the bolsheviks had to too, when they were called
on everything, even down to the shoelaces
on their boots. to pay for world war one.
and the nobilities palatial mansions.
the lords of lard, and mr. waxman of the us congress
have led you to the melting pot, but they want
you to melt, not them. keep on smoking.
even if the smoking lamp is not lit.
but always use the ashtrays. unless you put
it out in a can full of water. rocks break scissors,
paper wraps rocks, scissors cut paper. sitting
around with nothing to do? play 20 questions
or three thirds of a ghost. its a long ride
till next friday. its their train set, not mine.
they are the political engineers, not me.
i''m just like you for most part, along for the ride.
look at that pretty scenery. will the tracks
be out ahead? gee, i hope there is no derailment
by tribesmen living along the tracks. awwwww.
choo choo choo. gesundheit.

[sparks224]

Remember this: No matter WHO you choose for the upcoming primaries just vote DEMOCRAT, NOT Republican!!!
Posted by JBone514

Good advice.....about 8 years too late.

[t60401017]

i hope we are not going to see another deppression like in the 1930''s things now cost alot gas and milk food

[jbone514]

Remember this: No matter WHO you choose for the upcoming primaries just vote DEMOCRAT, NOT Republican!!!

[omega39-2009]

They have spent the last couple of decades *** over the American worker and now they sit around wondering why the American consumer won''t buy buy buy. Screw-them, let their vaunted "middle classes" in China and India bail them out.

[afmca]

This is the start of the Republican future. Middle class wealth gone. The Repubs used their religious wackos and their southern bubba lemmings to support the massive transfer of middle class wealth into the stock market and housing supposedly for retirement. The real plan was to con us into moving our little amount of wealth into centralized areas where the rich, powerful, and corrupt could grab it in a single action. Thus the collapse of the stock and housing markets.

If we continue down this path of blind obediance to Republican lies, America will be a military police state with the super rich living their immoral lifestyle with a decade; while the rest of us are imprisoned under pseudo-christian religious rule. Bottom line .. America will be Saudi Arabia with a christian slant.

[gkc99]

The stock market dropped?--what, did some people get hired into good paying jobs?

The billionaire boss class that owns and operates George W. Bushit operates by different rules from the rest of us.

[brianbwb-2009]

"...they cannot account for a huge and widening gulf between a monied minority, and what is left of the American middle class.

Nor can they explain why third-world scenes haunt our major cities, with people eating garbage and sleeping over grates (if they are lucky). Or why Americans spend 2.5 times more than EU citizens for what is called "healthcare"-- yet our infant mortality lags behind Cuba..." Posted by alphaa10

They can indeed explain it, but they know that a truthful explanation would trigger a revolution similar to the French one, and some aristocratic heads would roll again.

[ubrew12]

Bet on the stock market going up again. It should trend upward and here''s why...

Companies report their earnings in dollars, even their international earnings (now the lions share of earnings for most companies). Hence, EVEN IF THE COMPANY ISN''T EARNING MORE THAN LAST YEAR, its reported earnings should go up, because its reported in dollars, which are worth LESS than last year. Assuming its P/E isn''t inflated (which it could be...), its price should increase, as should that of the whole market.

And there you are: American investors benefit when GW Bush bankrupts the Fed resulting in a dropping dollar and the ''third-world''-ization of the American Middle Class. Ain''t capitalism great, folks??

[stevex47]

That was a very good read alpha. Thanks.

[alphaa10-2009]

This is the priceless moment when our free-market capitalists go into hiding. Gone is their brass band and confetti parade. Once again, they must acknowledge Killer Capitalism.

They blame it all (of course) on the feeding frenzy of speculation, of being the last in the herd, and first to be set upon by market mechanics. "Too bad," Bernanke says. "How unfortunate."

But fortune has little to do with it. Capitalism is not a benevolent system in the raw, and everyone knows it is kill-or-be-killed (often zero-sum) by design.

While those who still can play the market claim ours is the greatest country and economic system in the world, they cannot account for a huge and widening gulf between a monied minority, and what is left of the American middle class.

Nor can they explain why third-world scenes haunt our major cities, with people eating garbage and sleeping over grates (if they are lucky). Or why Americans spend 2.5 times more than EU citizens for what is called "healthcare"-- yet our infant mortality lags behind Cuba.

Capitalism is not a doctrine delivered on golden tablets from above, but a system whose imperfections require constant effort to overcome. To the True Believers of left and right goes this challenge-- we must renovate the American economic system to benefit all Americans by something far better than promises of "rising tides" and trickledown effects.

[usayesterday]

If the drop was due to worry over a dropping dollar value, how will chopping interest rates again help?

Posted by hypnotoad72 at 07:02 PM : Oct 19, 2007
...............

It won''t.

Lowering the federal interest rate only makes the value of the dollar weaker.

All it does is shave off a hundred dollars (or so) on the monthly payments for those who have adjustable rate mortgages (the worst kind of loan ever).

The real economic crisis that''s looming will be when the credit/debt that every American has, including our government, is no longer accepted.

[robertkjjj]

ooooooooohhhhh!!!!!! I''m scared

[hypnotoad72]

If the drop was due to worries on the credit card companies whining, it''s their own fault.

If the drop was due to worry over a dropping dollar value, how will chopping interest rates again help?

[feelfree1]

mediapreachr,

Re: "Maybe.What I''''m saying is that I''''m sick of people that have only one occupation:to scam regular individuals like me and you."

Agreed.

[tnt1954]

3 hots and a cot, means you''re among the high class.
post world war three planning. can we win the
peace? war was outlawed under the kellogg-briand
pact and league of nations. it still is under
the united nations. the u.n. is very armed and
dangerous and will destroy if you should disturb
the peace. like policemen at a riot. riot industry
by cobra verde makes a lotta money for riot gear,
associated window manufacturers and glaziers.
rebuilding towns is fun, after the riot.
so anyway, most know how ridiculous capitalism is.
body shops are praying to God, for thousands of
accidents this weekend to stimulate business and
get rich, and keep all their employees, lots
of work lined up. its a tricky business being
on the road. ya know some kid like i was at 16 is
going on the road tonight for the first time,
driving alone. look out, here he comes, pulling
on the freeway for the first time in his life,
and here comes a huge truck full of pickles. wanna
play pickle? takes five lanes at one turn of the
wheel. now in the fast lane. he got a 70 on his test. passed by one point. missed me by that much.

[frb01]

Outside of the past year, the market has done poor since 2000, when you factor in the recovery necessary from the drop in 2000 and then after 9/11. It has almost matched the terrible returns from 1970-78. Products like annuities and other more conservative investments look pretty *** good over this time period. A return of 6 or 7% without the stomach ache is pretty attractive.

[mediapreachr]

Maybe.What I''m saying is that I''m sick of people that have only one occupation:to scam regular individuals like me and you.

[feelfree1]

mediapreachr,

Re: "I read somewhere that Hamid Karzai''s real job was a sheep herder."

I don''t know about that, but he WAS a former executive for UNOCAL. That''s most likely why he was installed there- to help facilitate the extraction of resources from the region, and to help kick-start opium production, which had been all but wiped out by the Taliban.

Re: "There are too many people feeding off the working folk."

Can I get a witness...???