Leap Day Loser: Stocks Plummet

Dow Drops 315 Points As Investors React To More Bad Economic News

(CBS/AP)  Stocks fell sharply Friday after a series of depressing economic and corporate reports and high oil prices stoked concerns about the health of the economy. The major stock indexes fell more than 2.5 percent and the Dow Jones industrials lost 315 points.

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.

[pilgrimsway-2009]

That%u2019s the problem with Christianity? If talking to a religionists you%u2019re getting to know how to conform to a way and then to frustration, who needs it. Talking to a Christian you%u2019re getting to know how to have a personal relationship with God through Christ! Do you want self? Do you want God? Call on Jesus right now to help with your unbelief! Ask Jesus in and help you in your weakness. He loves you He died for you. He is alive!

[mcv57]

Milton Friedman answer''''s the problem

http://www.ideachannel.tv/

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.

[wardoglrs]

Milton Friedman answer''s the problem

http://www.ideachannel.tv/

[mcv57]

. . . YOU HAVE BEEN WARNED!

[mcv57]

It used to be thought that wars are good for the economy. No economist really believes that anymore,%u2019 Stiglitz said in an interview.

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!

[kellyafische]

Genisis Chapter 1 God gave people FREE food, FREE land, FREE education and he commanded the earth be made a paradise. BUY YOU have made it a money grab. A law after law after law creation. YOU have turned "gardeners" into consumers. This system is the problem. You should have made it so you can walk out your door and grab food off the tree and sit alongside your waterfall...and listen to your children play. Instead you are wondering if your children will be shot at school while you look for work so your mortgage will be paid and you can live in your house.

[kellyafische]

What religion is back a government who would do this to you? What religion is backing McCain? What religion backed Bush? Is it the same one that invaded America?

[kellyafische]

BAD ECONOMIC NEWS: You are on the same soil and in the same situation as the native american people. Robbed, disheartened, told it is a flu season and shots don''t work, you have your food rationed and are limited to homelessness or government subsidized housing. NOTHING absolutely nothing has changed except skin color. Was it not the law enforcement agency who said "What goes round comes round"? Same greedy takeover that existed when white men settled the USA.

[kellyafische]

Also, this is an "American" lesson! The very same people who took possession of the land belonging to the native Americans, are now taking possession of your land too! So do you think you can relate to how maybe, the souix and the Algonquin felt, being robbed and starved and housed in forts and given a small fraction of land and told to go to the religious missionary school to stop being savages?

[kellyafische]

When Europeans "discovered" America, the native Americans were already here. They were eating and drinking and making babies and living off the land. So why do YOU think YOU need money to eat and drink and marry and love? Native Americans built homes for generations of tree and birch and hides and did just fine. The economy can sink to the bottom and God will provide for you. He is also leveling the playing field so that all men are "equal"! lol