February 11, 2009 2:07 PM
- Text
Stocks Give Up Early Gains
(AP)
Wall Street has ended another highly volatile session with a big last-minute loss as the market's stubborn worries about a protracted downturn in the economy and tight credit markets erased the bulk of the financial sector's gains. The Dow Jones industrial average fell 203 points, with almost all the decline coming in the last 10 minutes.
The Street's back-and-forth was typical for a volatile market that has seen many recent rallies evaporate — particularly as hedge and mutual funds are forced to sell off even strong assets so they can meet investors' demands for their money back.
Alfred E. Goldman, chief market strategist at Wachovia Securities, said the market's late drop — which was particularly intense — after an earlier rally also reflects investors' ongoing uncertainty about the direction of the economy.
"We were trading higher earlier on very light volume, but the buyers just couldn't gather enough momentum to keep it going," he said. "When confidence is razor-thin, the nervous tension goes way up and bam, the sellers take over."
"It's just an overall malaise about how bad the economic slump is going to be globally," he said.
Banks got a boost earlier in the session after the Treasury said it signed agreements with nine financial institutions to buy stock in the companies this week. An upbeat home sales report also gave the market support until late afternoon.
The waffling in the market came amid light trading volumes ahead of possible interest rate moves from central banks — including the Federal Reserve, which is set to begin a two-day meeting Tuesday. The Fed is expected to lower its fed funds rate by a half-point to 1 percent on Wednesday. Investors are also optimistic that the European Central Bank is moving toward its own cut after President Jean-Claude Trichet said Monday such a step was "a possibility."
But while policymakers around the world have been trying to find a remedy for the fear of bad debt that has paralyzed parts of the credit markets in the past month, lending conditions have eased only slightly. Investors are worried that a drop-off in lending has damaged the economy.
The U.S. government is taking some of its first steps to steady the banking sector. The Treasury said it signed agreements with nine banks and will buy stock in the companies this week. The proceeds from the stock sales are intended to bolster the banks' balance sheets so they will begin more normal lending.
"Clearly, what's most important is that the funding crisis needs to be contained at this point," said Chris Orndorff, director of equity strategy at Payden & Rygel in Los Angeles. "The banks need to start taking on some more risks," he said. "I think it's going to take months."
According to preliminary calculations, the Dow fell 203.18, or 2.42 percent, to 8,175.77 after earlier rising 220 points.
Broader stock indicators showed even more sizable losses. The Standard & Poor's 500 index fell 27.85, or 3.18 percent, to 848.92, and the Nasdaq composite index fell 46.13, or 2.97 percent, to 1,505.90.
The Street's back-and-forth was typical for a volatile market that has seen many recent rallies evaporate — particularly as hedge and mutual funds are forced to sell off even strong assets so they can meet investors' demands for their money back.
Alfred E. Goldman, chief market strategist at Wachovia Securities, said the market's late drop — which was particularly intense — after an earlier rally also reflects investors' ongoing uncertainty about the direction of the economy.
"We were trading higher earlier on very light volume, but the buyers just couldn't gather enough momentum to keep it going," he said. "When confidence is razor-thin, the nervous tension goes way up and bam, the sellers take over."
"It's just an overall malaise about how bad the economic slump is going to be globally," he said.
Banks got a boost earlier in the session after the Treasury said it signed agreements with nine financial institutions to buy stock in the companies this week. An upbeat home sales report also gave the market support until late afternoon.
The waffling in the market came amid light trading volumes ahead of possible interest rate moves from central banks — including the Federal Reserve, which is set to begin a two-day meeting Tuesday. The Fed is expected to lower its fed funds rate by a half-point to 1 percent on Wednesday. Investors are also optimistic that the European Central Bank is moving toward its own cut after President Jean-Claude Trichet said Monday such a step was "a possibility."
But while policymakers around the world have been trying to find a remedy for the fear of bad debt that has paralyzed parts of the credit markets in the past month, lending conditions have eased only slightly. Investors are worried that a drop-off in lending has damaged the economy.
The U.S. government is taking some of its first steps to steady the banking sector. The Treasury said it signed agreements with nine banks and will buy stock in the companies this week. The proceeds from the stock sales are intended to bolster the banks' balance sheets so they will begin more normal lending.
"Clearly, what's most important is that the funding crisis needs to be contained at this point," said Chris Orndorff, director of equity strategy at Payden & Rygel in Los Angeles. "The banks need to start taking on some more risks," he said. "I think it's going to take months."
According to preliminary calculations, the Dow fell 203.18, or 2.42 percent, to 8,175.77 after earlier rising 220 points.
Broader stock indicators showed even more sizable losses. The Standard & Poor's 500 index fell 27.85, or 3.18 percent, to 848.92, and the Nasdaq composite index fell 46.13, or 2.97 percent, to 1,505.90.
Latest Now in MoneyWatch
- Previewing Obama's 2013 budget: Politics rule
- Clashes as Greek Parliament debates bailout law
- Ohio unemployment hits 3-year-low
- Jill on Money: Retirement investing, allocation, long term care
- Could "web-lining" be dangerous?
- Insurers respond cautiously to contraceptive plan
- Judge: Legally, breastfeeding not related to pregnancy
- Budget deficit drops to $27 billion in January
- Why the Powerball Jackpot is part of my investment strategy
- Is the new VW Beetle diesel worth the money?
- Consumer sentiment highlights risks to recovery
- Valentine blues? 10 best cities to be single
- December trade deficit widens to $48.8 billion
- Alcatel-Lucent returns to profit in 2011
- 6 things never to say in a performance review
- $26B mortgage deal: Who gets the money?
- Friendly's CEO steps down
Latest CBS News Headlines
on Facebook Most Discussed Stories
on CBS News
- Death of Whitney Houston leaves Grammys reeling
- 'The Artist' named best picture at British Academy Film Awards; 7 trophies in all
- Jean Dujardin wins best actor prize at British Academy Film Awards for 'The Artist'
- Meryl Streep wins best actress prize at British Academy Film Awards for 'The Iron Lady'
on Facebook Most Discussed Stories
on CBS News
