NEW YORK, Feb. 29, 2008
Leap Day Loser: Stocks Plummet
Dow Drops 315 Points As Investors React To More Bad Economic News
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(CBS/AP)
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Investors were unnerved by disappointing quarterly results from American International Group Inc. and Dell Inc. And an index of regional business activity that Wall Street regards as a good indicator of a broader report set to arrive next week had its weakest showing in more than six years.
Oil prices continued to stir concern about inflation after pushing past $103 per barrel for the first time.
Crude oil prices are so high in part because the dollar keeps falling, reports CBS News correspondent Bill Whitaker. That leaves people like Leslie Martinez caught in an economic vice.
"As of January 1st of '08, our mortgage increased approximately $400 a month -- that plus gas has definitely impacted us tremendously," she told Whitaker.
And the summer driving period, when gas prices usually heat up, is still months away.
While stocks made sharp gains in the first three days this week even amid somewhat lackluster economic readings, the litany of concerns investors succumbed to Friday reflected the undercurrent of uncertainty that has kept Wall Street on edge for months.
"We really had to face a plethora of negative news," said Art Hogan, chief market strategist at Jefferies & Co. in Boston. "We just ran out of gas this week."
Hogan said while stocks held up admirably early in the week amid an uneven flow of economic news, they couldn't hold their gains after the latest round of weak economic signals.
The Dow fell 315.79, or 2.51 percent, to 12,266.39. The decline more than erased the week's 200 point gain and sent stocks lower for February, the fourth straight month of declines.
Broader stock indicators also tumbled. The Standard & Poor's 500 index lost 37.05, or 2.71 percent, to 1,330.63, and the Nasdaq composite index declined 60.09, or 2.58 percent, to 2,271.48.
For the week, the Dow lost 0.93 percent, while the S&P 500 gave up 1.66 percent and the Nasdaq fell 2.58 percent. The week's losses would have been steeper had stocks not risen early in the week on hopes many of Wall Street's credit troubles were easing and after IBM Corp. announced a sizable stock repurchase plan.
Bond prices rose sharply as stocks lost ground. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.52 percent from 3.67 percent late Thursday.
The Chicago Board Options Exchange's volatility index, known as the VIX, and often referred to as the "fear index," jumped 12.5 percent.
The dollar fell further Friday after hitting another low against the euro and sliding to a three-year record against the yen. The slide in the dollar has sent prices of commodities such as oil and gold soaring.
Light, sweet crude jumped to a record of $103.05 overnight before settling down 75 cents at $101.84 a barrel on New York Mercantile Exchange.
Insurer AIG announced a $5.29 billion quarterly loss largely because of steep declines in the value of a portfolio of contracts known as credit default swaps. Such contracts pledge to cover missed payments on debt. The company's losses caught analysts off guard, as many had expected the company to turn a profit.
While each of the 30 stocks that comprise the Dow industrials showed declines, those of AIG were the steepest. The stock fell $3.29, or 6.6 percent, to $46.86.
Computer maker Dell posted a 6 percent decline in its quarterly profit, falling below analysts' expectations, and warned that its business could suffer from reduced customer spending. Dell slid 97 cents, or 4.7 percent, to $19.90.
Bill Shultz, chief investment officer at McQueen, Ball & Associates, said AIG's report left investors uneasy about the prospect of further sizable write-downs of bad debt.
"Every time we get to a point where we think we've finished, another report comes out and says we're not done yet," he said.
He expects Wall Street will continue to proceed with "fits and starts" until investors sense that the bad debt from faltering mortgages has been accounted for and that balance sheets are on the mend.
Some relief for the ailing bond insurance industry is on the way, though the news did little to dislodge Wall Street's glum mood Friday. Billionaire investor Wilbur Ross agreed to invest up to $1 billion in Bermuda-based reinsurer Assured Guaranty Ltd. Assured Guaranty rose $2.87, or 12.6 percent, to $25.65.
In economic news, the Chicago purchasing managers index for February came in at 44.5, a weaker reading than the 48.5 that had been expected, according to Dow Jones Newswires. The report painted a dreary picture of the manufacturing sector and is seen as a precursor to the national Institute for Supply Management report expected Monday.
A government report showed that personal spending, when stripping out the effects of inflation, stood unchanged in January. The findings arose further concern that consumers are more hesitant to reach into their wallets amid the uncertainties facing the economy.
A parade of economic worries has weighed on consumer as well. The Reuters-University of Michigan final consumer sentiment reading for February came in at 70.8, better than the figure of 69 that had been expected. Still, the index was well off the level of 78.4 seen in January.
Declining issues outnumbered advancers by about 8 to 1 on the New York Stock Exchange, where volume came to 1.76 billion shares compared with 1.46 billion shares traded Thursday.
The Russell 2000 index of smaller companies fell 19.54, or 2.8 percent, to 686.18.
Overseas, Japan's Nikkei stock average closed down 2.32 percent. Britain's FTSE 100 closed down 1.36 percent, Germany's DAX index fell 1.67 percent, and France's CAC-40 fell 1.67 percent.
© MMVIII, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
Michelle Obama tells how her role as the First Lady has changed her perspective.
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Posted by warDogLRS
I disagree. Reagan''s trickle theory was actually a failed philosophy of President Hoover (back in the Great Depression).
No, does not work. Try reading about PROUT, by Ravi Batra . . . now that is sound economics that EVERYBODY would work for.
http://www.ideachannel.tv/
Quoted by Nobel Economist - March 2, 2008
Get your money out of the Bank . . . their assets are really worthless without continued foreign funds to bail-out the markets. Right now, the U.S. Government is not concerned about the economy. ITS SOLE MISSION IS TO KEEP THAT WORTHLESS DOLLAR AFLOAT!
ITS SO BAD, THE BIG INSURANCE COMPANIES ARE STARTING TO COMPLAINT! AGAIN, ITS NOT ABOUT WHAT POLITICAL PUPPET YOU ELECT, ITS ABOUT THE MISMANAGEMENT OF FINANCIAL SYSTEM IN AMERICA - THE NOTE IS DUE, PEOPLE!
Don''''t worry retail stores!!!! Bush and the idiots (sounds like a band but it really is the name of the stupid Bushmeister and the idiotic, azz kissing Congress) are putting together a stimulus package to save you. It goes like this:
1. They borrow 161 billion dollars and give it to the low to mid income American taxpayers.
2. They beg the tax payer to forgo bills/debt and just go out and spend it all at your stores.
3. They have their fingers crossed that people are too ignorant or irresponsible to use the rebate for a bill and actually go out and buy a few things.
4. After each of them spends maybe 25.00 apiece at your store--you are stupid enough to see it as an incentive--and you go out and build new stores and hire lots of new workers to capitalize on the money that ...uhmmm...they no longer have...cuz they already...uhmmmm..spent it at your store.
5. Anyhoo. The plan is for all sides to ignore the dominoes falling and to plant yet another set at the end of the stack. Bush and the idiots only need this to work until Jan 29. 2009 after which (as far as Dubya is concerned) the economy can let ''''er rip.
Thanks GOP you are god; god of destruction.
Thanks GOP you are god; god of destruction.
He should declare, "My goal was to destroy the American dollar".
That way instead of being remembered as an incompetent president who made bad decisions, he would be remembered as a bad decision maker who was brilliant in implementing his agenda.
Great points! The one that probably has the biggest impact is the devaluation of the American dollar triggered by our record deficits.
Apparently the republican way is to put all the wealth into the hands of the few and screw the middle and lower classes. Bushs tax cuts are an example of putting the wealthy and corporate welfare ahead of the average American. The only way thats going to change is when we as Americans use our income level to determine who we should vote for. If that were to happen consider how effective the PACs and lobbists would be.
The belief is that putting all the wealth into the hands of the few will create a trickle down effect that eventually benefit the lower classes. However, it is is flawed because of greed, devaluation of the American dollar and the simple fact that many families will do more to stimulate the economy than a few can.
I am not sure the democrats are much better, but its very obvious the GOP has to be voted out.
The economic security of our nation depends on it.
And his dislike of England and the English!
About time for the Brits to dump their German bosses, eh?
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