Markets remain on edge as investors seek safety
NEW YORK » Volatility swept the financial markets again yesterday as investors grew nervous about an amorphous government plan to buy $700 billion in banks' mortgage debt. Stocks fell sharply, taking the Dow Jones industrials down more than 370 points, while investors sought safety in hard assets such as gold and oil, which at one point shot up more than $25 a barrel.
While investors last week were pleased that federal authorities were constructing a plan to relieve the nation's banks of their toxic assets, many weren't waiting for the details to emerge yesterday before seeking safety; selling was heavy across the market, although the financial sector again took some of the biggest hits.
The Dow fell 372.75, or 3.27 percent, to 11,015.69. The retreat follows the Dow's best two-day point gain since March 2000 so some retrenchment, especially amid the anxiety on the Street, wasn't unexpected. But the decline erased a gain of nearly 370 points from Friday.
Broader stock indicators also tumbled. The Standard & Poor's 500 index fell 47.99, or 3.82 percent, to 1,207.09, and the Nasdaq composite index fell 94.92, or 4.17 percent, to 2,178.98.
Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where consolidated volume came to 5.22 billion shares compared with an extremely heavy 9.1 billion traded Friday.
The Russell 2000 index of smaller companies fell 33.30, or 4.4 percent, to 720.44.
Oil's rise of $16.37 to a closing price $120.92 a barrel came as investors snapped up supplies to cover the October contract, which expired at the end of yesterday's session. Although the contract's pending expiration helped inflate crude's advance - it was up $25.45 at one point - trading still showed the intensity of emotion in the market, and still-active contracts also rose sharply.
Gold, also in demand as a safe haven, jumped more than $40.30 to settle at $909 an ounce.
The yield on the Treasury's 3-month Treasury bill was at 0.88 percent yesterday, down from 0.94 percent late Friday, indicating that investors were still willing to take low returns on a safe asset. However, the yield was well above yields around zero at the height of last week's frenetic buying; yields move in the opposite direction from price. Short-term Treasurys are seen as the safest place to put cash.
The Treasury's 2-year note's yield was at 2.16 percent, up from 2.13 percent Friday. The yield on the 10-year benchmark Treasury rose to 3.85 percent from 3.81 percent late Friday.
Morgan Stanley said it signed a letter of intent to sell up to a 20 percent stake to Mitsubishi UFJ Financial, Japan's largest bank, for an as yet undetermined price. Morgan Stanley fell 12 cents to $27.09.
Other financial stocks fell sharply amid the continued uncertainty about the sector. JPMorgan Chase & Co. fell $6.25, or 13 percent, to $40.80, while American Express Co. fell $3.11, or 7.7 percent, to $37.29.