Stocks still volatile despite early gains
POSTED: Tuesday, October 28, 2008
NEW YORK » Wall Street has ended another highly volatile session with a big last-minute loss as the market's stubborn worries about a protracted economic downturn and tight credit erased budding optimism about a housing sector recovery. The Dow Jones industrial average skidded 203 points to its lowest close in 51/2 years, with almost all the decline coming in the last 10 minutes of the session.
"It's just an overall malaise about how bad the economic slump is going to be globally," said Alfred E. Goldman, chief market strategist at Wachovia Securities.
That malaise grew particularly after credit ratings agency Moody's Investors Service in the last half-hour of trading yesterday downgraded General Motors Corp. further into "junk" status, pointing to the sharp contraction of the U.S. auto market. Shares of GM sank 50 cents, or 8.4 percent, to $5.45.
Earlier, banks got a boost after the Treasury said it signed agreements with nine financial institutions to buy stock in the companies this week.
The Dow fell 203.18, or 2.42 percent, to 8,175.77 after earlier rising by as many as 220 points. Even before the late-day selloff, it was an extremely volatile day for Wall Street - the Dow crossed between positive and negative territory 60 times during the session.
The blue-chip index is now 42.28 percent below its peak of 14,164.53, reached Oct. 9, 2007, and at its lowest closing level since April 1, 2003. Yesterday, it did not plunge below its Oct. 10 trading low of 7,882.50.
Broader stock indicators showed 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 Russell 2000 index of smaller companies fell 22.72, or 4.82 percent, to 448.40.
The waffling in the market came ahead of possible interest rate moves from central banks - including the Federal Reserve, which is set to begin a two-day meeting today. The Fed is expected to lower its fed funds rate by a half point to 1 percent tomorrow.
The U.S. government is taking some of its first steps to steady the banking sector. The U.S. 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.
Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange. Consolidated volume came to 5.48 billion shares, down from 6.45 billion Friday.
Light, sweet crude fell 93 cents to settle at $63.22 a barrel on the New York Mercantile Exchange.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.69 percent from 3.72 percent late Friday. The dollar was higher against most other major currencies, except the yen, while gold prices rose.
The yield on the three-month bill fell to 0.77 percent from 0.82 percent late Thursday.