Markets Plummet After Grim Economic News

Dismal Jobless, Retail Numbers Bring Post-Election Dip; Dow Falls Nearly 450

(CBS/AP)  Wall Street plunged for a second day, triggered by computer gear maker Cisco Systems warning of slumping demand and retailers reporting weak sales for October. Concerns about widespread economic weakness sent the major stock indexes down more than 4 percent Thursday, including the Dow Jones industrial average, which tumbled more than 440 points.

Major indexes have lost about 10 percent since Barack Obama was elected president - a vote preceded by a steep rally - and the losses represent the Dow's worst two-day percentage decline since the October 1987 crash.

Paper losses during that time in U.S. stocks came to $1.2 trillion, according to the Dow Jones Wilshire 5000 Composite Index, which represents nearly all stocks traded in America.

Retailers across the country are hurting as prospects for a disappointing holiday shopping season loom, reports CBS News correspondent Sandra Hughes.

Comments from Cisco that it saw a steep drop in orders in October and reports from retailers that consumers are skipping trips to the mall provided fresh evidence of the economy's struggles. Worries about automakers and the financial sector compounded investors' unease.

A day ahead of Friday's key October employment report, a widely watched barometer of the economy's health, the Labor Department said the number of people continuing to draw unemployment benefits jumped to a 25-year high. The increase by 122,000 to 3.84 million in late October marked the highest level since late February 1983, when the economy was being buffeted by a protracted recession.

"The economy is in a pretty significant downturn and I think that is broad-based because it is all interconnected," said Ed Hyland, global investment specialist at J.P. Morgan's Private Bank. "This is something that we haven't really seen, this level of this rapid and significant pullback both in the market and the economy."

Thursday's rout follows a drop of more than 5 percent in the market Wednesday that saw the Dow plunge nearly 500 points as investors fretted that weak readings on employment and downcast profit forecasts and job cuts from financial companies to steelmakers signaled broad economic troubles.

Still, the market's two-day slide follows an enormous run-up since last week so some pullback was expected, analysts said. Through the six sessions that ended Tuesday, the benchmark Standard & Poor's 500 index surged 18.3 percent.

Richard Campagna, chief investment officer at Provident Investment Counsel in Pasadena, Calif., contends the market's pullback isn't surprising given the size of the recent run-up, which gave the Dow its best run in 34 years last week. He said the weak economic readings aren't a surprise because of the freeze in credit markets that has disrupted lending and other economic activity since the mid-September bankruptcy of Lehman Brothers Holdings Inc.

Campagna said the light volume and overall fear among investors is exacerbating the market's volatility.

"Some people are pushing this market around more than they should be out of fear," he said. "Many everyday investors are sitting on the sidelines."

"Everyone has been shellshocked with the moves in the market," he said.

The Dow fell 443.48, or 4.85 percent, to 8,695.79 after falling as much as 502 in the final five minutes of trading. The blue chips remain 520 points, or 6.4 percent, above 8,176, their Oct. 27 closing low from the market's yearlong decline.

Broader stock indicators also posted sharp losses. The Standard & Poor's 500 index fell 47.89, or 5.03 percent, to 904.88, and the Nasdaq composite index fell 72.94, or 4.34 percent, to 1,608.70.

Over the past two days, the Dow is down 9.7 percent, the S&P 500 index is off 10 percent and the Nasdaq is down 9.6 percent.

The Russell 2000 index of smaller companies fell 18.80, or 3.65 percent, to 495.84 on Thursday, bringing its two-day decline to 9.2 percent.

Declining issues outnumbered advancers by about 5 to 1 on the New York Stock Exchange, where volume came to 1.53 billion shares.

The dollar traded mixed against most other major currencies, while gold prices fell.

Light, sweet crude fell $4.53 to settle at $60.77 a barrel on the New York Mercantile Exchange as fears of a slowing economy led to predictions demand will fall.

Cisco Systems Inc.'s comments added to investors' nervousness. The world's largest maker of computer networking gear said orders declined sharply last month, suggesting to the market that the weak economy and tight credit markets are taking a larger-than-expected toll on many companies around the world. Cisco fell 45 cents, or 2.6 percent, to $16.94.

A range of industries have been bruised by the economy. Japanese automaker Toyota Motor Corp. lowered its annual profit forecast Thursday to less than a third of what it was in previous fiscal year. Toyota tumbled $13.28, or 16.5 percent, to $67.09. Other automakers fell ahead of quarterly results due Friday and worries about their health. General Motors Corp. tumbled 76 cents, or 13.7 percent, to $4.80, while Ford Motor Co. fell 11 cents, or 5.3 percent, to $1.98.

Auto executives met with Democratic congressional leaders Thursday to ask for their own federal assistance amid rough economic times.

Among retailers, Wal-Mart fell 64 cents to $53.49 after reporting better-than-expected sales. But most other retailers didn't attract as many shoppers. Limited Stores Inc. fell $1.10, or 9.6 percent, to $10.41 while Ann Taylor Stores Corp. fell $3.09, or 26 percent, to $8.93.

A range of corporate news weighed on the market. News Corp. fell $1.62, or 16.3 percent, to $8.31 after the media company warned of slowing advertising revenue and slashed its 2009 forecast. Blackstone Group LP, one of the world's largest private-equity funds, fell $1.05, or 12.2 percent, to $7.55 after reporting that the financial crisis hurt the value of its investments.

Hyland said the day's news was a reminder that while the market might be off its October lows following an array of government moves to revive lending, the medicine will take some time to work.

"I think that we're in a bottoming process but the market will tend to have three, four, or five bottoms as it goes through the bear market," he said.

Even the election, which had been one area of uncertainty, now presents a new set of questions, he said, even though the market largely had expected an Obama win.

"How does an Obama administration deal with it and what are the implications?"

Bank-to-bank lending rates fell for the 19th straight day, a sign that banks are becoming more willing to lend. The London Interbank Offered Rate, or Libor, for three-month dollar loans dipped to 2.39 percent from 2.51 percent.

The three-month Treasury bill, considered the ultimate safe asset, saw its yield dip further to 0.30 percent from 0.42 percent late Wednesday. In general, a lower yield means higher demand, but it is also affected by the federal funds rate.

The yield on the benchmark 10-year Treasury note fell to 3.70 percent from 3.73 percent late Wednesday.

The latest round of economic worries largely overshadowed interest rate cuts by central banks in Europe. The Bank of England slashed its key interest rate by a bold 1.5 percentage points Thursday, while the European Central Bank lowered its key rate by a half-point.

Britain's FTSE 100 fell 5.70 percent, Germany's DAX index fell 6.84 percent, and France's CAC-40 fell 6.38 percent. In Asian trading, Japan's Nikkei index closed down 6.53 percent, and Hong Kong's Hang Seng Index fell 7.08 percent.

[mrjustice1]

HARSH MEASURES NEEDED FOR RECTIFICATION OF FRAUDULENT WALL ST INVESTMENT BANKER SCHEMES AND SCAMS, INCLUDING CESSATION OF SECRET, OFF-SHORE BANK ACCOUNTS

The number of victims to whom Wall St and ''off Wall St'' investment bankers have caused financial ruin, is absolutely mind boggling. In America alone, that number(with modest estimates) is in the TENS OF MILLIONS to more than a HUNDRED MILLION, and globally, financially ruined and cheated victims (modestly again) tally HUNDREDS OF MILLIONS, and is likely to be over A BILLION PEOPLE!

What continues to be covered up, is the fact that the so-called free enterprise/rape-the-public system, has granted and protected these financial and fiduciary parasites, with LICENSES TO STEAL. And swindle, and mislead, and scheme and scam, and steal they did.

Confiscation and redistribution of these financial criminals'' money, properties, assets, etc, along with meting out appropriate long prison terms must be sought after by government prosecutors.

By the way, many of these parasites are already planning for the new cycle of investment ''products''!

Perhaps just as fraudulent is the fact that those who were appointed to repair the disaster, are part of the ''Protect Wall St & friends'' establishment. It''s nothing better than the fox watching over the hens'' coop!

[wl7bzh]

IF YOU WANT TO HELP YOUR COUNTRY ? THE NEXT TIME YOU GO SHOPPING MAKE SURE IT IS 100% MADE IN AMERICA AND SEND A MESSAGE TO WALL STREET

Posted by tootall1014 at 09:36 AM : Nov 07, 2008

Buy American? You mean like those companies whose unions have driven the price of products up and the quality of products down. Like those same ones that are now going bankrupt because they could not compete? Or better yet, like housing, pharmaceuticals, etc.?

Sorry, but due to American business practices most people can''t afford to buy American.

BTW when has America ever enjoyed this imagined utopia the conservatives and libertarians attribute to free, unbridled markets? IT never has and never will. It is a fallacious theory rooted in unbridled greed which is not a moral value btw

If tax cuts for the wealthy is the only way to grow an economy, where are all the jobs? We''ve seen over the past 8 years in particular and 30 in general the trend to trickle down economics. IT has crippled the lower and middle classes by keeping wages low despite some job growth,resulting in an inability to participate in the economy beyond mere survival, if that. The result is less demand and therefore more job loss. Just because you let the rich keep more money does not mean they''re gonna'' reinvest. More cash has to be inserted into the lower rungs of WORKING people in order to get this economy moving again.

[erich_1-2009]

I want to hear Optimistic Obama people posting explaining to me why a person who has money should not take their money out of the Stock Market and put it in Gold, or another vehicle of investment.

[erich_1-2009]

With the Capital Gains Tax promised to be raised by an Obama Administration I have advised my relatives to immediately get out of the Stock Market. If a person waits until after December they may have to pay that Tax on their ''09 tax returns.

My brother and I think that the Stock Market will tank to about 5,000.

[trillion1]

What morons. Taxing the wealthy will make prices go up? When all these companies moved over seas for cheap labor the retail cost of their products didn''t drop. The companies just pocketed the the billions in additional profits.

[perceptions5]

We need to balance the Federal budget now.

The American people just received a $350 billion dollar stimulus with oil dropping over 50% in the last couple of months.

Instead of $4.25 gallon gas Americans will be paying less than $2.00 in a couple of weeks. I paid $2.11 yesterday.

Not only are we seeing energy prices drop but watch for food and clothing and EVERYTHING else to drop as the lower cost of energy is reflected in falling commodity prices during the next several months.

The BEST thing the Democrats can do is to keep energy CHEAP which means they need to tell their Big Donor, Environmentalist''s to take a hike for a while while we bridge the gap between old energy and new cleaner energy.

The last thing we need is to go back to the old "public works" jobs of FDR and Jimmy Carter, that''s NOT how you grow the economy.

You grow the economy by being "Business friendly".

The only problem now is that the Party leading our nation is "anti-business friendly". So the next four years should be interesting.

I think we are going to see a lot of failed economic experiments.

GOP...............standby

[youngthinker]

Again to add onto my first comment lowering taxes for the lower and middle class and raising fot the rich is usless. Consumer products will spike making the middle and lower class tax breaks pointless. So enjoy.

[youngthinker]

Evidentaly everyone agree''s there are a multiple number of problems afflicting our economy, but assuming president Obama does lower taxes for the poor and raise it for the rich what honestly is that going to do for us. It doesnt matter now if you raise taxes or not for the rich with a trillions of dollars in there pockets. Think about this they are not rich because they are just rich they employ the middle and low class so taxing them increases all consumer products. Even a little increase we can not handle. So all we are doing is shooting our selves in the foot AGAIN. All we can hopefully get threw is a few restrictions on our large corporations. Then ride it out nothing more or less. We are in a state of not only deep deep depression, but reccesion so enjoy.