Dow Drops 500 Points In Turbulent Trading

Skittish Investors Fearful About Ailing Financial Firms

(CBS/AP)  Wall Street has had yet another dismal day Tuesday, extending its heavy losses as investors' worries about the financial sector wiped out early enthusiasm over the Federal Reserve's efforts to inject confidence into the credit markets. Trading remained fractious and grew more turbulent in the last hour, with the Dow Jones industrial average losing more than 500 points and all the major indexes falling more than 5 percent.

This latest plunge, which followed a big drop on Monday, came after Bank of America Corp. reported its third-quarter profits fell 68 percent.

The Dow was down 508 points at the closing bell, or 5.11 percent, at the 9,447 level, after falling nearly 370 Monday. The broader Standard & Poor's 500 index is down 5.73 percent and the Nasdaq composite index is down 5.80 percent.

Credit markets showed some signs of easing as demand for safe-haven investments decreased. Credit markets seized up last month after Lehman Brothers Holdings Inc. declared bankruptcy and the government stepped in to rescue insurer American International Group Inc.

The forecast for the nation's economy keeps getting gloomier. And the weatherman bearing the bad news Tuesday was Federal Reserve Chairman Ben Bernanke.

"The outlook for economic growth has worsened and the downside risks to growth have increased," Bernanke said in an address this afternoon.

So the Fed will try to use a blowtorch to thaw the frozen credit markets by making short term loans directly to big businesses, reports CBS News business correspondent Anthony Mason.

The move is "Extremely unusual," says Wall Street historian Charles Geisst. "It's never been done before. And it's also getting close to a desperate move."

The "commercial paper market," as it's called, is critical to large companies that need quick cash to buy supplies or meet payroll. The businesses offer what essentially are short-term IOUs that pay interest. They're usually financed by money market funds or major investors.

Credit card companies, for example, use them to pay merchants, while waiting for your monthly payment. But as the credit system has seized up, even blue chip companies like Caterpillar and General Electric have been forced to pay much higher interest rates for short-term loans they need. That's why the Fed has made this historic move.

If it doesn't work, Geisst said, "Consumer credit is gonna dry up very quickly."

Already in August, consumer borrowing fell for the first time in more than a decade. News of the Fed's latest move initially rallied the markets. But that optimism soon evaporated.

"We are kind of in a post traumatic stress order phase - one loud noise and we are all jumping a little bit," says Bernard McSherry of Cuttone & Company.

Even Bernanke's hint of another rate cut couldn't lift Wall Street's spirits. As one trader put it: "We want the Fed to fire the gun. We're just afraid they're gonna run out of bullets."

Despite Bernanke's attempt to console the stock market, investors remain worried about financial companies like Bank of America Corp., which after the closing bell Monday slashed its dividend and reported that its third-quarter profit fell 68 percent. The stock fell $4.68, or 15 percent, to $27.54 and was the steepest decliner among the 30 stocks that comprise the Dow Jones industrial average.

Investors are fearful that financial companies will continue to face cash shortages even with efforts in Washington and by other governments to resuscitate lending.

Investors are still hoping to see other moves from the Fed to boost confidence. Australia's central bank lowered interest rates by the largest amount since 1992 in a surprise move, and that reignited hopes that others, including the Fed and European Central Bank, might follow suit.

Though not giving the market a rate cut, the Fed has taken other steps to help unclog the credit markets. On Tuesday, policymakers provided more details about when it will make $900 billion in short-term loans available to squeezed banks.

The loans are made available to banks through auctions. The Fed, in coordination with other countries' central banks engaged in similar efforts, laid out dates that it will conduct the auctions through the rest of this year.

Concerns about the credit markets still fed demand for the relative safety of government debt, though pressures eased. Demand for short-term Treasurys remains high because of their safety; investors are willing to take extremely low returns just to have their money in a secure place.

Some investors moved into longer-term Treasury bonds, which while still safe don't draw as much demand as shorter-term debt in times of fear. The yield on the 10-year note fell to 3.52 percent from 3.50 percent late Monday.

Oil prices rebounded after plunging Monday to an eight-month low on concerns a global recession will undermine demand for crude. Light, sweet crude rose $2.36 to $90.17 a barrel on the New York Mercantile Exchange.

---

Editor's Note: This story was updated on Oct. 8, 2008, to report that Caterpillar and General Electric are facing higher interest rates for short-term loans. High credit-rated CAT and GE are getting loans (selling bonds) -- just at higher premiums than they would like and many analysts expect.
.

[cariboubarbi]

In just 8 short years, Republicans have accomplished what Al Qaeda never could. They''ve bankrupted the country and very nearly brought it to it''s knees.

What do you people do for an encore?

Oh that''s right, you''ve given us John McSame.

No thanks!

[easeup-2009]

Posted by CaribouBarbi at 09:53 AM : Oct 07, 2008

We''re you on here praising Bush when the market hit 14,000?

[marshall65]

"We''''re you on here praising Bush when the market hit 14,000? "...........I would have been if the market had held, but unlike Clinton''s recovery plan, Bush''s small tactical jabs at the market never sustained anything. That is partly the reason for our disaster today. Bush can''t be blamed for everything, but as men of honor would say, it happened on his watch.

[andylance1]

There is a downturn in the economy about every ten years, regardless of who is president. When Bush took office, we were experiencing the collapse of the Dot Com bubble from the Clinton years and high tech stocks on NASDAQ were in the crapper.

We then had the fall out of the 9-11 disaster. No air travel, no vacations, airlines going under and the stock market was in turmoil, plus the expense of hitting the Taliban in Afghanistan.

Meanwhile, China and India started getting more prosperous and started consuming a lot more oil. Every year since 2002, the price of oil went up because of international demand and the stupidity of our Democratic Congress which kept us from drilling for domestic oil and building nuke plants for electricity. In spite of this, Detroit kept building gas hog SUVs and pickups.

Meanwhile, Wall Street started running amok. Computer trading allowed for giant swings in prices for commodities, financials, real estate, etc. The laws regulating Wall Street were written 30 - 40 years ago, long before the age of the personal computer, and greed went unchecked and corrupted Congressional oversight and politicians of both parties.

[generey]

Up, down, up, down. Its all a big game & joke people. And people are the pawns.

[ajaxtheleast]

17 down ???

Best they do better than that or bush
will have to get some of his pals to
artificially jack up the numbers
for McCain''s treading-water
debate tonight!!

IF,, they have any breaed left!!

[perceptions5]

The Early Line: Diageo/Hotline Tracking Poll
Obama-Biden 46%
McCain-Palin 44%
Undecided 9%

-- The race has tightened in the last day. After trailing by 5-7 pts. for the last 10 days, McCain is now just 2 pts. behind Obama.

--One potential reason: Obama''s one-time lead on the question of who''d best handle the economy has evaporated. Today, Obama and McCain are tied at 42%. Independent voters favor McCain on the economy by an 8 pt. margin (42-34%).

--Even so, among the 62% of voters who picked the economy as their #1 issue, Obama leads McCain by 9 pts. - 49-40%.

Today''s Diageo/Hotline tracking poll, conducted 10/4-6 by FD; surveyed 908 LVs; margin of error +/- 3.3% Party ID Breakdown: 40%D, 38%R, 18%I

[rebelrepubli]

The City of Orlando (Florida) announced today that it will spend approximately $28M in federal funds received to buy "distressed mortgages", fix um up and sell them as "affordable housing." I recently pondered what would happen if the government ended up owning a bunch of homes. One option, I figured, was for them to convert them into "section 8" (e.g. affordable housing). Looks like YOU might have NEW neighbors in the near future.

[txgrouch2006]

NEXT STEP - investigate the fat cats'''' personal trading over the past year for signs of INSIDER TRADING.

The Dow fell STEADILY from 14,000 to 10,000 since January. THERE MUST BE A REASON why someone SEEMED TO KNOW IN ADVANCE.

[txgrouch2006]

NEXT STEP - investigate the fat cats'''''''' personal trading over the past year for signs of INSIDER TRADING.

The Dow fell STEADILY from 14,000 to 10,000 since January. THERE MUST BE A REASON why someone SEEMED TO KNOW IN ADVANCE.

[jackp32]

I''ll vote for the man who sends me my bailout check and new credit cards but my vote is not for sale.

[chyenna-2009]

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Saw these "Google Ads". Looks like some have money to loan. Notice one ad doest''t require a SS#.

[jlagat]

Actually txgrouch2006, if there''s anything we can take from our last two presidents, it''s that the ones responsible for this mess are Southerners.

America should never have elected people to the Presidency from a region of the nation where money comes in the form of welfare checks.

[indivthinker]

Actually txgrouch2006, if there''''s anything we can take from our last two presidents, it''''s that the ones responsible for this mess are Southerners.

America should never have elected people to the Presidency from a region of the nation where money comes in the form of welfare checks.

Posted by jlagat at 11:16 AM : Oct 07, 2008

What are you talking about? Texas and Florida have two of the strongest state economies in the US, certainly more resilient than NY or California right now. The only people in the South that take from welfare are the aliens (both legal and illegal).

[edward1975-2009]

Republicans and Democrats, in Washington, alike should be hanging their heads, so taxpayers can''t see them laughing. They threw 700 billion at a problem money could not solve. And they knew it. Despite the people not wanting this done, we knew it wouldn''t work, they did it anyway. Wall St. would have recovered after these inflated assets fell to actual worth. And business would have gone on as usual.

[edward1975-2009]

Republicans and Democrats, in Washington, alike should be hanging their heads, so taxpayers can''t see them laughing. They threw 700 billion at a problem money could not solve. And they knew it. Despite the people not wanting this done, we knew it wouldn''t work, they did it anyway. Wall St. would have recovered after these inflated assets fell to actual worth. And business would have gone on as usual.

[lastdance127]

Definition of TREASON :
1 : The betrayal of a trust : treachery
2 : The offense of attempting by Overt acts to overthrow the
government of the state to which the offender owes allegiance

ECONOMIC STRIFE
That is Being used as a Weapon to
ELIMINATE a DEMOCRACY and REPLACE IT
With The Totalitarian Dictatorship of

A NAZI FASCIST RULE

Against : The Populace of the United States

Any Corporation or POLITICAL INFLUENCE
That has Supported and Assisted in
The Achievement of : PURPOSELY and INTENTIONALLY
DESTROYING : The DEMOCRATIC INFRASTRUCTURE and
The ECONOMIC INFRASTRUCTURE of The United States
Is an : Act of TREASON

Treason : The Endorsement of Every Employee of :
The Political Criminal - FBI

TREASON is : A CRIMINAL ACT ! !

[donevis-2009]

Wall St. would have recovered after these inflated assets fell to actual worth. And business would have gone on as usual.

Posted by Edward1975 at 11:42 AM : Oct 07, 2008

Business As Usual? What have you been smoking? There will be no more "Business as Usual" The Bush Administration used a martial law threat on Congress. If they didn''t pass this bill Congressional martial law would be instated and the Bill shoved up our *** anyway! This sort of action is indcitive of our new Government and it''s ways of doing business. We don''t need no stinking Constitution, "it''s only a piece of paper" "God Speed USA"

[missingamerica]

Contrast

Bush, 09/06/08: "I believe that in the long run, this economy will be just fine."

with

02/07/200 Donald Rumsfeld, to U.S. troops in Aviano, Italy: "It is unknowable how long that conflict will last. It could last six days, six weeks. I doubt six months."

It really makes you wonder just how long "in the long run" and how many years will pass before we can fix what the Republicans have broken in their greed.

Time, like morality, ethics, and integrity, and honesty, seems to be measured quite differently by Republicans.

[pianoman42]

Meawhile will those accountants lawyers and realtors who were the architects of the subprime scam get their comeuppance for creative accounting sticky packaging and tricky selling.

[edward1975-2009]

This was created by assets being inflated, sometimes by as much as 33%, and bundled then sold to investors. This created the fallout in the banking world and market. Had Congress let the natural course of things run it course, things would of settled. They put together a bailout they knew would not work and let the taxpayer foot the bill. Both Bush and Congress failed the people again. And we are still headed for that recession.

[checkthepast]

before we can fix what the Republicans have broken in their greed.

Posted by ibsteve2u

This is getting to be old and obnoxious steve, (and the rest) greed on wall street has no political preference. Dems are known as the poor peoples party only because they have been buying votes with welfare and social programs for the past century.

If the sun comes up you praise the dems, if the sun goes down you curse the reps. That''s the total sum of the substance of your posts. You might just as well admit it, you (and many others) are just that transparent. Including obama....

[antoniof123]

Posted by checkthepast at 01:30 PM : Oct 07, 2008

Hate to tell you this but the spearhead of the deregulation was the GOP. That is why when asked 2 to 1 people in the United States blame the Republicans over the Democrats. So it is my belief that Americans know what they are talking about so in effect it is the truth that the Republicans are to blame. Remember in 1994 the Republicans were saying it was the Democrats to blame and they like it when it was on their side. Now they don''t like it. But what is good for the goose is good for the gander.

[jd_heath]

I guess if it is BILLIONS, there is no crime. Why the hell isn''t someone going to jail? And I mean right now. Also, Dodd and Frank should be forced to resign their positions at minimum and recalled if possible. What a couple of oblivious, incompetent boobs. Unless heads roll on a massive scale, this is nothing but very, very expensive lip service.

[antoniof123]

Also, Dodd and Frank should be forced to resign their positions at minimum and recalled if possible. What a couple of oblivious, incompetent boobs. Unless heads roll on a massive scale, this is nothing but very, very expensive lip service.

Posted by jd_heath at 01:48 PM : Oct 07, 2008

The reason why Dodd and Frank don''t have to resign is because no laws were broken. Sorry but this last time I checked was still America. But if you want them to resign then we should recall Bush and Cheney and the rest of the cratel right. In fact it should retroactive with them they were incompente from the moment they took office so all of their appointees should also resign.

[lemonskink]

Stock up on canned goods, medical supplies, and arm yourselves. This Great Depression coming to America is going to be a helluva lot worse than the thirties. And you can thank GWB and his minions for it. I''m in awe that anyone would even think of putting any Republican in office these days...

http://www.youtube.com/watch?v=EcZSh1diQRQ

[credibility2]

The Dems are just as filthy, corrupt and culpable for this crisis. It''s not just Repubs, Bush, the last eight years and Wall Street. Add to this stew the Dems, their entitlement programs and those on Main Street who hadn''t any right to home ownership and subprime loans, which was the brainchild of the socialist Dems.

[jseymouriii]

Quote:Until this liberal democrat led congress CUTS SPENDING, we will continue this downward rollercoaster ride right to the bottom!

Posted by Hwy71So at 12:57 PM : Oct 07, 2008

And what about your wonderfully corrupt republican congress that had 6 years to do the same??

[easeup-2009]

Stock up on canned goods, medical supplies, and arm yourselves. This Great Depression coming to America is going to be a helluva lot worse than the thirties. And you can thank GWB and his minions for it. I''''m in awe that anyone would even think of putting any Republican in office these days...

http://www.youtube.com/watch?
v=EcZSh1diQRQ

Posted by Lemonskink at 01:58 PM : Oct 07, 2008

OK Chicken Little!! BTW how''s Henny Penny?

LOL!!!!!!

[yeswecan09]

Until this liberal democrat led congress CUTS SPENDING, we will continue this downward rollercoaster ride right to the bottom!
*****

I agree! Let us start with the biggest financial bleeder, Iraq. 10 Billion a month and this country does not see a dime of benefit.

[donevis-2009]

The Stock Market ticker appears to be a drunken sailor heading for the cement pavement. I guess he tried to drink away that hangover Mr. Bush commented on a while back. "God Speed USA"

[credibility2]

The younger crowd at the helm of the market are a bunch of impatient and scared losers who are in a panic because they aren''t getting the immediacy they''ve become accustomed to throughout their young life. The crisis has taken decades and will not go away overnight, even with the government''s bailout, which by the way, is still being formulated and developed. The government was a big part of the crisis, so let''s not hold our breaths waiting for them to do something. We''re in a crisis and they''ve left town to go and campaign. Obviously we know what''s the priority here, now don''t we?

[june-moon]

I am 61 years old and I fell like a child being at the whim of mommy and daddy meaning "We the People" don''t seem to have any voice in what is going on and what should be done about it. The "problems" have been created by the government, banking, business, and labor unions robbing peter-to-pay-Paul. Now the government with the urging of their cohorts has buried us in more debt...it must stop.
We must vote out all members of Congress and the Senate, and anyone else that is not using SOUND judgment. Who isn''t looking for the root causes of this mess and implementing practices that will prevent these issues from ever happening again. To start we need to appoint a group of persons to investigate and recommend changes for implementation. This group should be made up of persons from the government, banking, business, and labor. The group should be chaired by Condoleezza Rice. There should also be consideration to include persons in related positions outside of the United States. This is a worldwide problem--let%u2019s work the problem together.
Have a great day,
June-Moon

[b-gene]

The only people in the South that take from welfare are the aliens (both legal and illegal).
Posted by indivthinker at 11:26 AM : Oct 07, 2008

WRONG!!! I was born in the country & I want everything I can get from welfare, food stamps, medicaid...all of it. That way when I die I will know I got something out of my tax money. Taxpayers WILL pay my way from now on.

[lochlan-2009]

Face it America, the corporations bribed the government into passing legislation that allowed them to scam this country into an economic collapse, and the media, and your representatives were mute and in some cases contributed to the fraud by lieing, misinforming, and allowing the events to take course.

The war has been fought, and Americans, you lost.

"Let''''s face it, everyone. Our government is broken"
Posted by elicatlover

No, it''s not, we are, we pay little or no attention to what''s going on, we don''t vote, we don''t write, call,e-mail our representatives. We only do something when it gets bad or affects us directly.

At times like this, we finally wake up, but will we vote the B.A.S.T.A.R.D.S out? will we study the issues, will we be more than one issue voters, will we examine the history of our repesentatives?

History shows otherwise. The politicians know this, weather the storm then get on with THEIR business.

Get involved, stay involved.

[mollybee5]

All the kings horses and all the kings men, cant put humpty back together again -

[lemonskink]

This just in: Retirement assets are down 2 trillion dollars in the last fifteen months. Are you sure you want "4 MORE YEARS?"

http://www.youtube.com/watch?v=EcZSh1diQRQ

[antoniof123]

A few weeks ago I heard a conservative analyst telling everyone to buy it was a bargin.

Glad I didn''t listen to him and I am staying out until I see a stable market. But hey you conservatives buy buy it is a bargin out there.

[edthelight]

Get ready for an economic wild ride. Invest in weapons and stockpile dry goods. It will get a lot worse. The BAILOUT was Congress taking care of their fellow thieves. Remember birds of a feather flock together, as this wasted BAILOUT is showing.

The LIEING THIEVING ELITE are sitting at the top of the hill on their bags of ill gotten gains while laughing at the American Taxpayers who are neck deep in ***. VOTE THE B***TURDS OUT OF OFFICE

[three-o-six]

About 25 years ago I realized that my retirement depended on the stock market. I cut in half the amount I was investing in retirement and started a savings accout. When I could pay cash for a piece of land, I bought it. Boy am I glad now. While my retirement account has taken a beating I still own about 250 acres in multiple parcels. While the value of the land may have receded some it is still worth much more than my retirement plans. I guess that is why they call it REALestate.

[edward1975-2009]

You can''t have a system that only offers the people two choices, just as ours does. Until campaign reform is demanded by the people, it will remain the same. It''s not the government that is broken, it''s our acceptance of mediocre people tryint to solve national problems. Our two dung party system is so corrupt and vile, that people who honestly wish to make this place better, won''t dirty themselves in this bottom of the barrel thing we call politics. It''s up to us to effect a change and we better start soon.

[gwjackie]

BE armed when this starts have plenty of ammo lots of food this will take some time.

[gwjackie]

If McCain has his way the old people will not have to worry about medicare or medicade they will not have any. If yo are on this check it out.

[easeup-2009]

BE armed when this starts have plenty of ammo lots of food this will take some time.

Posted by gwjackie at 03:17 PM : Oct 07, 2008

Get ready for an economic wild ride. Invest in weapons and stockpile dry goods. It will get a lot worse. The BAILOUT was Congress taking care of their fellow thieves. Remember birds of a feather flock together, as this wasted BAILOUT is showing.

The LIEING THIEVING ELITE are sitting at the top of the hill on their bags of ill gotten gains while laughing at the American Taxpayers who are neck deep in ***. VOTE THE B***TURDS OUT OF OFFICE

Posted by EdTheLight at 03:07 PM : Oct 07, 2008

ROFLMAO!!!!!!! You two are priceless.

[random_radar]

three-o-six, you are the smartest person I have heard of in quite a while. Real estate has always been the best long term investment if you make wise purchases. You have proven what I have been saying for years.

[easeup-2009]

three-o-six

Stocks are still good over the long haul--so is real estate.

http://stockcharts.com/charts/historical/djia1900.html

[gwjackie]

No one in there right mind could vote for John McCain with him it will be worse than George Bush he had something to ruin with McCain there is very little left.

[gwjackie]

Come Nov4 we can make as many changes as voting will let the people in this country. The people in office need to go look for a job that they cant find.

[lastdance127]

Definition of TREASON :
1 : The betrayal of a trust : treachery
2 : The offense of attempting by Overt acts to overthrow the
government of the state to which the offender owes allegiance

ECONOMIC STRIFE
That is Being used as a Weapon to
ELIMINATE a DEMOCRACY and REPLACE IT
With The Totalitarian Dictatorship of

A NAZI FASCIST RULE

Against : The Populace of the United States

Any Corporation or POLITICAL INFLUENCE
That has Supported and Assisted in
The Achievement of : PURPOSELY and INTENTIONALLY
DESTROYING : The DEMOCRATIC INFRASTRUCTURE and
The ECONOMIC INFRASTRUCTURE of The United States
Is an : Act of TREASON

TREASON is : A CRIMINAL ACT ! !

ECONOMIC STRIFE : The Endorsement of :
The Republican NAZI Fascist Party