June 23, 2010 6:03 PM
- Text
Stocks Plunge As Dollar Hits New Low
(CBS/AP)
Wall Street suffered its second big drop in a week Wednesday, with investors worried about spreading fallout from the credit crisis at banks and about a dollar that just keeps getting weaker. The Dow Jones industrial average fell more than 360 points, just about matching its plunge of last Thursday.
The Dow's plunge was its third 300-point drop in just four weeks, reports CBS News correspondent Anthony Mason. And the Dow has now fallen 800 points, or 6 percent, from its all-time high less than a month ago.
Stocks were rattled right out of the gate after General Motors posted a stunning $39 billion loss, most of it due to tax accounting charges.
Then the dollar tumbled to new lows, adds Mason, after a Chinese official called for his country to move some of its foreign currency reserves out of the weakening greenback and into stronger currencies like the euro.
Meanwhile, oil prices stalled in their climb toward $100 a barrel after a government report said oil inventories fell less than expected last week while refinery utilization remained flat.
Oil investors largely viewed the report as neutral in that it confirmed a view that oil supplies are falling, but offered no real surprises. A larger than expected drop would most certainly have propelled oil past $100 a barrel for the first time.
Crude inventories did fall at the closely-watched New York Mercantile Exchange delivery terminal in Cushing, Okla., but that did not appear to be enough to propel prices sharply higher.
"We got kind of a mixed reaction," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
At the pump, meanwhile, the national average price of a gallon of gas rose 1.9 cents overnight to $3.043, according to AAA and the Oil Price Information Service. Prices are up nearly 29 cents since mid-October and are 85 cents higher than a year ago.
"I don't think it's a question of whether we hit $100. It's a question of how much time we might spend there," Tom Kloza of the Oil Price Information Service told CBS' The Early Show.
The 13-nation euro hit a fresh record against the dollar, rising to $1.4729 - before falling back. The dollar fell not only against the euro but in Asia following a report that a senior Chinese political figure said China should diversify its $1.43 trillion foreign exchange reserves into the euro and other strong currencies.
The fear with a huge drop like Wednesday's is whether it is part not just of a correction, which is a 10 percent pullback in stock prices, but that it could be the beginning of a bear market. With the huge volatility that has swept Wall Street since the summer, and triple-digit moves in the Dow becoming commonplace, no one can be sure.
Still, the concern on the Street is that the extent of the fallout from the credit market crisis that has led to billions of dollars in losses for major banks and investment firms is not yet known. With Citigroup Inc. announcing Sunday it needed to take an additional $8 billion to $11 billion in writedowns, investors are very uneasy not just about stocks, but the economy as a whole.
"The financials are the bodyguards of the market and when the bodyguards are taking shots then the market can't do well," said David Darst, chief investment strategist for Morgan Stanley's global wealth management group.
"A lot of the bad stuff is known, what the markets are worrying about is the unknown," Darst said.
According to preliminary calculations, the Dow fell 360.92, or 2.64 percent, to 13,300.02. The Dow, which had gained 117 points on Tuesday, had fallen 362.14 last Thursday, reflecting the extreme fractiousness on Wall Street these days.
Broader stock indicators also pulled back Wednesday. The Standard & Poor's 500 index fell 44.65, or 2.94 percent, to 1,475.62, moving below the psychological benchmark of 1,500. The Nasdaq composite index fell 76.42, or 2.70 percent, to 2,748.76.
The Russell 2000 index of smaller companies fell 25.81, or 3.22 percent, to 775.96.
The Dow's plunge was its third 300-point drop in just four weeks, reports CBS News correspondent Anthony Mason. And the Dow has now fallen 800 points, or 6 percent, from its all-time high less than a month ago.
Stocks were rattled right out of the gate after General Motors posted a stunning $39 billion loss, most of it due to tax accounting charges.
Then the dollar tumbled to new lows, adds Mason, after a Chinese official called for his country to move some of its foreign currency reserves out of the weakening greenback and into stronger currencies like the euro.
Meanwhile, oil prices stalled in their climb toward $100 a barrel after a government report said oil inventories fell less than expected last week while refinery utilization remained flat.
Oil investors largely viewed the report as neutral in that it confirmed a view that oil supplies are falling, but offered no real surprises. A larger than expected drop would most certainly have propelled oil past $100 a barrel for the first time.
Crude inventories did fall at the closely-watched New York Mercantile Exchange delivery terminal in Cushing, Okla., but that did not appear to be enough to propel prices sharply higher.
"We got kind of a mixed reaction," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
At the pump, meanwhile, the national average price of a gallon of gas rose 1.9 cents overnight to $3.043, according to AAA and the Oil Price Information Service. Prices are up nearly 29 cents since mid-October and are 85 cents higher than a year ago.
"I don't think it's a question of whether we hit $100. It's a question of how much time we might spend there," Tom Kloza of the Oil Price Information Service told CBS' The Early Show.
The 13-nation euro hit a fresh record against the dollar, rising to $1.4729 - before falling back. The dollar fell not only against the euro but in Asia following a report that a senior Chinese political figure said China should diversify its $1.43 trillion foreign exchange reserves into the euro and other strong currencies.
The fear with a huge drop like Wednesday's is whether it is part not just of a correction, which is a 10 percent pullback in stock prices, but that it could be the beginning of a bear market. With the huge volatility that has swept Wall Street since the summer, and triple-digit moves in the Dow becoming commonplace, no one can be sure.
Still, the concern on the Street is that the extent of the fallout from the credit market crisis that has led to billions of dollars in losses for major banks and investment firms is not yet known. With Citigroup Inc. announcing Sunday it needed to take an additional $8 billion to $11 billion in writedowns, investors are very uneasy not just about stocks, but the economy as a whole.
"The financials are the bodyguards of the market and when the bodyguards are taking shots then the market can't do well," said David Darst, chief investment strategist for Morgan Stanley's global wealth management group.
"A lot of the bad stuff is known, what the markets are worrying about is the unknown," Darst said.
According to preliminary calculations, the Dow fell 360.92, or 2.64 percent, to 13,300.02. The Dow, which had gained 117 points on Tuesday, had fallen 362.14 last Thursday, reflecting the extreme fractiousness on Wall Street these days.
Broader stock indicators also pulled back Wednesday. The Standard & Poor's 500 index fell 44.65, or 2.94 percent, to 1,475.62, moving below the psychological benchmark of 1,500. The Nasdaq composite index fell 76.42, or 2.70 percent, to 2,748.76.
The Russell 2000 index of smaller companies fell 25.81, or 3.22 percent, to 775.96.
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