WASHINGTON, Nov. 19, 2008
Dow Falls Below 8,000, S&P At 5-Year Low
Investors Rattled By Economy, Fate Of Big 3 Automakers; Consumer Prices Take Record Plunge
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A cascade of selling occurred in the final minutes of the session as investors yanked money out of the market. For many, the real fear is that the recession might be even more protracted if Capitol Hill is unable to bail out the troubled auto industry.
Investors also scoured economic data that included minutes from the last meeting of the Federal Reserve in which policymakers lowered projections for economic activity this year and next. Economic worries caused across-the-board selling, with financial stocks particularly hard hit.
The S&P 500, widely considered the broadest snapshot of corporate America, slipped 6.12 percent to 806.58; and the Dow gave up 5.07 percent to 7,997.28. Both closed at their lowest levels since March 2003.
The financial crisis has already wiped out $6.69 trillion of value from the S&P 500 since its October 2007 high, and many fear more is to come. Stocks have traded with high volatility in the past few months, with the major indexes soaring only to plunge an hour later as the market looks for a bottom.
"I don't know what the catalyst is going to be where we turn the corner and people start buying stocks wholeheartedly again," said Jon Biele, head of capital markets at Cowen & Co. "People got out of the way. The financial situation hasn't changed."
The selling on the New York Stock Exchange was staggering - only 158 companies that trade there finished the day positive while 2,943 declined. Volume again was light, a symptom of the market's recent volatility, with 1.63 million shares exchanging hands by the close.
Smaller stocks also got clobbered. The Russell 2000 index gave up 35.13, or 7.85 percent, to 412.38.
Meanwhile, American consumers hit by a seemingly endless stream of bad news, from vanishing jobs to shrinking retirement accounts, got a small dose of relief: lower prices at stores.
The Consumer Price Index, the country's most closely watched inflation gauge, dropped 1 percent in October, the biggest monthly decline on records dating back to 1947, the government reported Wednesday.
The big drop reflected not only a huge fall in gasoline and other energy costs, but widespread declines in other areas. Core consumer prices, which exclude food and energy, fell by 0.1 percent last month, the first drop in core prices in more than a quarter-century.
What's getting cheaper? New cars as dealers sold nearly 130,000 fewer of them in October; clothing and airfare are also down, reports CBS News correspondent Ben Tracy. But energy prices are the loss leader - down 8.6 percent in October, mainly due to a 14 percent drop in the price of gas.
Just a couple of months ago the fear was inflation. Now, Tracy reports, some economists say today's numbers, which show a cut in the cost of living, could mean a jumpstart for the ailing economy.
"Their wages will be worth more, so it probably will aid the recovery," says economist Peter Morici.
But while lower prices may be exactly what cashed-out consumers need, prolonged price drops would cause serious deflation - potentially putting more stores out of business and more people out of work, reports Tracy.
"When prices start to go down, when you have deflation, consumers a lot of the time basically sit back and wait for more bargains, for more sales," Gross says.
The big retreat in consumer prices reflects a remarkable turnaround from just a few months ago when a relentless surge in energy prices raised concerns that inflation could get out of control.
Over the past 12 months, consumer prices have risen by 3.7 percent, substantially below the 17-year high of a 12-month price increase of 5.6 percent set this summer. Core prices are up 2.2 percent over the past 12 months.
This price moderation is giving the Federal Reserve the room it needs to cut interest rates to battle the economic slump. The central bank is expected to cut the federal funds rate, the interest that banks charge each other, down to 0.5 percent at its December meeting, even lower than the 1 percent where the funds rate stands currently. The 1 percent funds rate ties the record low for the past half century.
Even with the monthly price reprieve, consumers are in no mood to go on a shopping spree. They have been cutting back sharply on spending because of the strains from job losses, shrinking nest eggs and falling home prices.
The retrenchment jolted the national economy into reverse in the third quarter. Many predict economic activity will continue to shrink through the rest of this year and during the first three months of next year, more than satisfying one definition of a recession. That is, two straight quarters where the economy contracts.
Another report out Wednesday showed that the housing market, one of the economy's weakest spots, continues to be in a deep funk. Builders slashed home construction 4.5 percent last month driving it down to the lowest level on records going back to 1959.
© 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 169 CommentsSame thing happened to Wyanmar Germany before people will carting paper money in wheel-barrels.
Mark My Words.
Our money is fiat money, so no point in hordeing it, it has no intrinsic value.
Gold, maybe.. maybe.
BTW, there are a LOT of things that are different now then they were during the Weimar republic, I wouldn''t worry too much
Posted by random_radar
You are so right. There is almost nothing being done about the failed right wing policies of privatization and anti-regulation. The "trickle down" theory, championed by Reagan and already proven to be a disaster, is going full tilt.
As in most fascist countries like America, the big corporations run the government and use it to enrich themselves. I say We the People seize the assets of the rich or we SHUT DOWN THE COUNTRY.
Hey I hope they don''t because when the big 3 fail it will be more workers are of work of wait more voters our of work.
That should pretty much end the GOP so they can go the way of the wigs. I can tell you this much there is nothing worst than a reformed conservative and that is me.
Just like a smoker I want to make it against the law so too with the GOP neo cons.
The Democrats ought to be partying in the streets. Woo Hoo big business really got theirs. STick it to em. Yahooo!!!
I WANTED TO SEE pictures of DOUSCHEBAGS on Wall Street Gasping and Holding Their Hands Over Their Mouth and Looking UP.
CBS.com your not on the ball today that picture was needed with a HEAD LINE LIKE Dow Falls Below 8,000, S&P At 5-Year Low !
Posted by standlee5 at 04:26 PM : Nov 19, 2008
Yeah sure. The Dems are at a fault before Bush took office. They''re at fault even before they take office. And the eight years in between were just hunky-dory.
Posted by standlee5 at 04:26 PM : Nov 19, 2008
Nice try fool.
Everybody knows that this is nothing more than the continued fallout of the failed republican policy of: "Trust big business to police themselves - the CEO''s will take care of America''s economy first!!"
Everybody knows that this is nothing more than the continued fallout of the failed republican policy of: "Trust big business to police themselves - the CEO''''s will take care of America''''s economy first!!"
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Posted by grouchyjohn
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Any moron can tell you this is all the fault of the liberals.
Posted by standlee5 at 04:26 PM : Nov 19, 2008
ROFLMAO Right! So how long did it take you to get that 6th grade education? Man YOU have got to be the biggest loser of them all IF you actually believe the man that the MAJORITY of this nation picked to lead them OUT of this mess is responsible for it! I mean even a gapped toothed Trailer Dweller should be smart enough to figure out that the REPUBLICANS were voted OUT for a REASON.. the REASON was the ECONOMY!! ROFLMAO People are SELLING Stock and getting out of the MARKET for a REASON.. THE ECONOMY stupid... PLEASE do yourself a favor... take a night course or two... learn to read and just the basic stuff... stop being such an embarrassment!! ROFLMAO
Yeah! Don''t blame Bush for anything. Don''t blame him for deficit spending, for deregulation, for an unnecessary war, for not caring about the American people or anything else. The man is from a god. All worship as he exits stage right.
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Posted by gop_will_Win at 04:44 PM
Any moron? You got that right!!!!
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Posted by rudy6543
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Anyone with half a brain can tell you that Bush is not to blame for this.
Posted by gop_will_Win at 04:41 PM : Nov 19, 2008
REALLY! Well give me ONE, just ONE Market Expert who agrees with you on this one! On second thought give me ONE 2nd grader who agrees with you on this one. The Market will turn around when peoples confidence in our leader returns, when PEOPLE, the SAME PEOPLE who by a 65% majority think OBAMA will turn it around, find him in charge. Do you fools honestly think ANYONE, well other than the Bootlickers, buy this? ROFLMAO My 8 year old grandson LAUGHS at you so they have GOT to be lower than 3rd grade! LOL Whew!
"There is a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hand, saying that they''re going to be trimming down and streamlining their businesses," Rep. Gary Ackerman, D-New York, told the chief executive officers of Ford, Chrysler and General Motors at a hearing of the House Financial Services Committee.
"It''s almost like seeing a guy show up at the soup kitchen in high hat and tuxedo. It kind of makes you a little bit suspicious."
He added, "couldn''t you all have downgraded to first class or jet-pooled or something to get here? It would have at least sent a message that you do get it."
Can you believe the size of the balls on these guys?
land and surrounding areas. People were still sitting
on the beach as the water, that would soon kill them,
was quickly rising around them. That''s us.
Posted by rudy6543 at 04:45 PM : Nov 19, 2008
This freefall is a combination of the sub-prime debacle and market jitters over an obama/pelosi/reid regime. The sub-prime can be traced back to govt. intervention in the banking system to regulate them to make loans to people who couldn''t pay for them.
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Posted by ghostfighter
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Any idiot can tell you that all of these problems Bush inherited from Clinton.
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Posted by standlee5
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And that explains why all the foreclosures are in those bad neighborhoods.
Posted by ghostfighter at 04:59 PM : Nov 19, 2008
yeah, no denying that. But enough of experimental economics and experimental government. enough already.
I hear it argued that we must save the automakers to save jobs. But the total number of jobs provided by automakers and those dependent upon services to automakers account is only 846,000 positions. Yes this sounds big, but Walmart alone has 1.4 million employees. And furthermore, yesterday the automakers stated auto sales will be down to 10 million annually (from the 15 million last year). That to me says job losses/consolidation regardless of whether they get the money. And furthermore, they stated this money will only get them through March. Why are we not investing in our roads, alternative forms of energy, etc?....each which would create millions of jobs?
Any bailout should be spent on fixing the housing crisis or it won''t matter if GM/Ford/Chrysler survive. If you can''t afford your mortgage payment, you surely aren''t going to buy a car.
If we don''t stop this bailout, this will set a precedent for the airlines to be next, then hotels/travel industry, then restaurants, etc. It''s got to stop.
Contact Congress and tell them to vote no.
http://www.emailthecongress.com
Posted by ConDumbistan at 05:04 PM : Nov 19, 2008
Your exactly right! Not one democrat or non-republican is responsible for the current situation!
The democrats bottom-up policy will show them!
By the way, can you please explain which policies of the Republicans caused this crisis?
True! people act like idiots, lose a lot of money, then look for someone to blame? Do they pick the people responsible? bankers? CEOs? the President? past Presidents? No instead of the people who had the power to fix things and failed, they blame a man who is not yet in power. If you blame Obama for your current financial situation, you show the real cause of your loss: stupidity.
We should have just taken the punishment back in the Clinton years and let the market level out but they kept tweaking and tweaking to create bubbles to avoid a recession. It sucks.
This is the only way we can restore confidence in the economy, business, and markets, and get things moving. Only the government is in a position to restore trust and hope, as it has done successfully before.
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They got one thing right.
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It really is the fools that voted for him that are to blame.
Hard to do without liquid assets.
I don''t know he is on, but I want some.
What a LIE.
why don''t you put the conditions on the money that they ''must'' change their model? what model should it be senator shelby?
if you ''wish they would'' then you can help them along ... we''ll give you the money if you do this ...
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