Dow Falls Off A Cliff
679-Point Stock Swoon Pushes Blue Chip Index Below 9,000 Mark For First Time Since 2003
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Photo
Specialist Thomas Laughlin works as his post on the floor of the New York Stock Exchange, Thursday morning (AP)
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Video
Seven Isn't Lucky Anymore
As the Dow continues its downward spiral General Motors saw its shares fall below $5, a level that hasn't been seen since the 1950's. Anthony Mason reports.
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Timeline
Financial Meltdown
Track major events that lead to one of the most tumultuous times in Wall Street's history.
Stocks lost more than 7 percent, $872 billion of investments evaporated, and the Dow fell to 8,579. When the average crashed through the 9,000 level for the first time in five years in the final hour of trading, sellers had only begun to hit the gas pedal.
As bad as the day was, even worse was the cumulative effect of a historic run of declines: The Dow suffered a triple-digit loss for the sixth day in a row, a first, and the average dropped for the seventh day in a row, a losing streak not seen since 2002.
"Right now the market is just panicked," said David Wyss, chief economist at Standard & Poor's in New York. "Nobody wants to take on any risk. Everybody just wants to get their money and put it under the mattress."
It all took place one year to the day after the Dow closed at its record high of 14,164. Since that day, frozen credit, record foreclosures, cascading job losses and outright fear have seized the market and sapped 39 percent of its value.
Paper losses for the year add up to an staggering $8.3 trillion, according to figures measured by the Dow Jones Wilshire 5000 Composite Index, which tracks 5,000 U.S.-based companies representing almost all stocks traded in America.
It was the second straight day that Wall Street was rocked by a final-hour sell-off, but this one was particularly shocking.
Most of the day was relatively calm, and the trading floor was quieter than usual because of the Jewish holiday of Yom Kippur. Wall Street awoke to news the federal government was brandishing a new weapon against the financial crisis - considering seeking an equity stake in major U.S. banks in order to stabilize them.
But that step appeared to be as ineffectual as the others Washington has rolled out in recent weeks, including a $700 billion bailout of the financial industry, a coordinated interest rate cut by central banks around the world and direct lending by the Federal Reserve to private companies to provide them with short-term cash.
Acquiring a stake in the banks would be yet another startling intervention by the government in the free market, but economists said President George W. Bush was left with little choice because of the credit markets, where tight lending has choked off the everyday cash that is the lifeblood of the economy.
"In normal times, this would be out of the question, but in the present dire situation, I think the government should be employing all the powers that it can," said Sung Won Sohn, an economics professor at California State University, Channel Islands.
After the closing bell, shellshocked traders and bankers gathered at Bobby Van's Steakhouse and downed beers and drinks to chase the ghastly numbers. One Wall Streeter joked things had gotten so bad that he should apply for a job as a waiter.
"It was an ugly day, there's no ways to put it," said another customer, Alan Valdes, director of floor operations for Hallard, Lyons. "Guys were frustrated, just fed up. ... We're in an area no one has been in since 1930."
Wall Street has been teetering on the brink of panic for a month now, vulnerable to any bad news. Thursday's sell-off was triggered when a major credit rating agency put General Motors Corp. and its finance affiliate under review to determine whether it should be downgraded.
General Motors stock fell below $5 a share today - a level not seen since the 1950s, reports CBS News business correspondent Anthony Mason. Just last month, GM produced a video to reassure investors.
For the Dow, it has been nothing short of a free fall:
The average is down 2,338 points, or 21 percent, in the last four weeks, since the Lehman Brothers bankruptcy escalated a long-running credit crunch into a full-fledged crisis.
It was an ugly day, there's no ways to put it. Guys were frustrated, just fed up. ... We're in an area no one has been in since 1930."
Alan Valdes, director of floor operations for Hallard, LyonsOf the last 19 trading days, there have been 11 triple-digit losses - including the unprecedented six straight. The six gains have all been triple-digits, and only one of them was enough to make up the losses of the day before.
The Dow now stands only about 1,300 points above its lowest close of the bear market that followed 9/11. In a market as volatile as this, that gap can be closed in a couple of trading days, or less.
In fact, triple-digit declines can happen almost in an instant.
On Thursday, the Dow was above 9,200 after 1:30 p.m. and still above 9,000 after 3 p.m. The pressure to sell was so intense that the Dow kept dropping precipitously for 10 minutes after the 4 p.m. closing bell as the day's losses were tabulated.
In percentage terms, the drop in the Dow exceeded the day the markets reopened after the Sept. 11, 2001, terrorist attacks. It was not close to the 22.6-percent decline on Black Monday in 1987, the last stock market crash.
Still, it is becoming increasingly clear that Washington has ever fewer places to reach in its toolbox to stop, or perhaps even slow, the crisis. Among the options still left are buying up foreclosed properties and making direct loans to homeowners, both of them hard for free-market supporters to swallow.
"There is a lot of uncertainty as to exactly how long this situation persists and what exactly will get us out of this in terms of the financial markets and, therefore, their effect on the economy," Dean Mackey of Barclay's Capital told CBS News.
Speaking in the afternoon before the market closed, President Bush told an audience on the South Lawn of the White House that the economy was going through a "very tough stretch." But, he said: "I'm confident in our economy's long-term prospects."
After the market closed, the White House said Americans should remain confident despite the market plunge, and Bush planned to speak from the Rose Garden on Friday morning - though he was not expected to unveil any new policy proposals.
House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid asked Bush on Thursday to call an emergency meeting of the G-8 industrial nations' heads of state to address the continuing global credit freeze and instability in world markets. The G-8 comprises France, Germany, Italy, Britain, Japan, the United States, Canada and Russia.
In the markets Thursday, the broader stock indicators registered similar declines to the Dow's. The Standard & Poor's 500 index fell 7.6 percent to the 909 level, and the Nasdaq composite index fell 5.5 percent to 1,645.
Meanwhile, the credit markets remained stubbornly locked-up. The benchmark rate that banks charge each other for loans, known as Libor, rose to 4.75 percent from 4.52 percent a day earlier, signaling banks are still afraid to make loans because they worry they won't be paid back.
"The story is getting to be like that movie Groundhog Day," said Arthur Hogan, chief market analyst at Jefferies & Co. "Everything we're seeing is historic. The problem is historic, the solutions are historic, and unfortunately, the sell-off is historic. It's not the kind of history you want to be making."
Adding to Wall Street's nervousness, a ban on short selling - a process in which investors borrow shares of stock and essentially bet the value will fall - expired.
With three and a half weeks before voters elect Bush's successor, there was also no immediate comment on the Wall Street action from the presidential candidates, Democratic Sen. Barack Obama and Republican Sen. John McCain.
Earlier in the day in Dayton, Ohio, Obama took aim at McCain's plan to have the government absorb the full cost of renegotiating mortgages for borrowers under strain from the dramatic decline of the values of their homes.
McCain rolled out the idea at the second presidential debate earlier this week, a forum in which he also told voters it was important to have a steady hand in the White House during a time of economic crisis.
© MMVIII, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.



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See all 406 CommentsSymbol Last Chg % Chg Delete
AAPL 91.96 +2.17 2.42%
MSFT 23.60 0.59 2.57%
GOOG 342.22 4.11 1.22%
INTC 16.88 0.63 3.88%
GE 20.23 -0.42 -2.03%
XOM 73.39 -3.61 -4.69%
F 2.41 -0.25 -9.40%
GM 5.77 -1.14 -16.50%
SIRI 0.47 0.01 2.20%
CSCO 18.11 -0.23 -1.25%
Apple Inc
turning into a Friday night
Used Beer Curve.
The fact that the Federal Reserve is run by a few rich families, and not the government, is scary in some ways. The good thing is, the Federal Reserve IS run by a few families, and not our government. Our government only cares about surviving until their terms are up. The Rothschilds, Rockefellers, DuPonts, and Morgans have families, children and grandchildren in the US, and they intend to keep this country strong.
Don''t panic. It''s all under control.
Think of the world economy as a football game. When it snows, it snows on both teams. The men on the field are all cold. They all slip. They all have trouble seeing the lines on the fields. The game is still fair. That''s what''s happening. All markets are going down in tandem.
Retirements are shrinking, but goods will become less expensive. As soon as the panic subsides, all boats will rise.
And thus a new boom/bust cycle begins. The whole point to regulatory processes and oversight - which were pretty much put to sleep during Bush''s watch - is to level out the "highs" and backstop the "lows". I wouldn''t have any objections to buying equities whose prices have fallen into the john, but I would be very nervous about borrowing money to do so...
"Others owe us more than we owe others. We have loaned money, at interest, to most of the countries in the world..." Posted by downtowner97 at 01:56 PM : Oct 09, 2008
I''m not so sure - at least about the part where we have more money owed to us than we owe. The United States has been, for years, one of the world''s biggest debtor nations. One of the reasons the crash of our own financial structures has spread to a worldwide panic is the fact that no one has much confidence America is able, let alone willing, to pay its own obligations.
We will be a looooong time coming out of the hole we are now in.
Posted by Upto1947 at 01:56 PM : Oct 09, 2008
A rule of thumb when looking at unemployment figures during bear market times is multiply the official umemployment rate by 2.5 to get a true number of employable adults not now working. 6.1 is the last unemployment figure I heard. If that rule holds, "true" unemployment is somewhere around 18 percent. It doesn''t look good.
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Posted by max0010
Take BACK the country? Absolutely we need to take BACK the country from the dangerous fiscal policies of the deregulating Republican slimeballs. Obama, please HELP~!
Step 1: Find a desk
Step 2: ::headdesk::
Step 3: repeat
Posted by stevemccoy7 at 02:56 PM : Oct 09, 2008"
You already have Bush-Paulson-Obama-Frank-Dodd-Pelosi-Reid. They all worked together for a bipartisan deal to skrew the citizens. Its just that a whole bunch of citizens are too stupid to see that both parties are working together to skrew them.
Party loyalty is a peculiar blindness afflicting 99% of America. But that just means America deserves the destruction they brought on themselves.
Review who signed the Financial Services Modernization Act of 1999 that would do away with restrictions on the integration of banking, insurance and stock trading imposed by the Glass-Steagall Act of 1933 -- It was your beloved President Clinton.
The problem is eventhough the intent was to promote deregulation of the financial industry the democrats and their do good for all policies ruined it by forcing regulation.
obi wan kenobi
Being a bottom feeder right now works great.
Ever think if the press just shut up for a few days instead of speading doom and gloom, it might help.
Same with all the BS from the government "experts" just take a few days shut up, let the money begin to flow let the market sort itself out.
When the market turns (and it will) there will be money made.
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Posted by GOP_WILL_WIN at 03:46 PM : Oct 09, 2008
Do and no, with what I bought at the low today there is only 30 cents difference between my average buy and the low. It may be bumpy but it will rise.
Being a bottom feeder right now works great.
Ever think if the press just shut up for a few days instead of speading doom and gloom, it might help.
Same with all the BS from the government "experts" just take a few days shut up, let the money begin to flow let the market sort itself out.
When the market turns (and it will) there will be money made.
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Posted by rickwar
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You are not what I would call a bottom feeder. The word I would use is bagholder.
When the Dow Jones hits 6660.00 get on your knees and pray hard for your salvation.
He will return to take his children home, to take them to the new Jerusalem.
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Posted by rickwar
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Did you get it under $5?
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Posted by GOP_WILL_WIN at 03:53 PM : Oct 09, 2008
actually 5.18
He knew the weakest sector was Financial and shorts were waiting to pounce on these weakened companies. Yet he did not extend the short selling ban.
This just accelerates the downfall.
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Posted by Hacker11001
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I have only one stock, QID and its doing quite well during all of this.
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Posted by rickwar
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$4.80 now. Dont you get real time quotes Mr Livermore?
Obama giving instructions to Odinga (his cousin) on winning the "power"
He knew the weakest sector was Financial and shorts were waiting to pounce on these weakened companies. Yet he did not extend the short selling ban.
This just accelerates the downfall.
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Posted by rights4all
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Its people pulling out of their mutual funds now.
Drove my chevy to the levee,
But the levee was dry.
And them good old boys were drinkin%u2019 whiskey and rye
Singin%u2019, "this%u2019ll be the day that I die.
"this%u2019ll be the day that I die."
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Posted by downtowner97 at 04:01 PM : Oct 09, 2008
LOL, boy george wil be on the news & he will reassure us all that everything will be ok! (They gave another $35B to AIG today!).
Gawd I love the pics of the traders!
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Posted by downtowner97 at 04:01 PM : Oct 09, 2008
Busy puking over the can because he now knows what his legacy will be. He wanted one he got it. War, Economic Collapse, disaster handling disasters, a total and complete failure in every area. Followed by McSame and "in the dark" airhead Palin.
Did they get upset when two elections were stolen or they lied us into a war for oil? Did we protest when they illegally spied and tortured or stacked the courts with right wing activist judges?
Maybe now we can recognize the fascist movement that has taken over the US.
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Posted by closethippy1 at 03:59 PM : Oct 09, 2008
Already got my targets picked out!
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Posted by GOP_WILL_WIN at 04:05 PM : Oct 09, 2008
Sure, pull out at the bottom, fear and panic reign.
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Posted by downtowner97 at 04:09 PM : Oct 09, 2008
Got it from the start:) just fueling it
GOP see any chance of wining go down the drain.
LOL it just gets funnier and funnier with that bunch. They really beleive the spew they put forth.
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Posted by downtowner97
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Whats being sarcastic?
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Posted by rickwar
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Why do you blame them? They want to keep what they have left. Me I pulled most of my stock holdings months ago and only kept QID which is an ultrashort fund.
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