From the Wall Street Journal online:
By PETER A. MCKAY | OCTOBER 9, 2008, 5:10 P.M. ET
The stock market’s collapse accelerated Thursday as bank lending remained stubbornly clogged and investors remained unwilling to hold anything except cash and government debt, no matter how tiny the returns for doing so.
The Dow Jones Industrial Average declined for a seventh straight day, plunging 678.91 points, or 7.3%, to 8579.19. Blue chips last dipped below the 9000 level five years ago. Thursday’s fall was the Dow’s third-worst all time in point terms and 11th worst in percentage terms. During its recent losing run, blue chips have fallen by a startling 20.9% and are down 39.4% from their record high, which was hit exactly one year ago.
“This is indiscriminate selling,” said trader Todd Salamone, of Schaeffer’s Investment Research, an analysis and asset-management firm in Cincinnati. “Not until there are massive improvements in the credit markets are we likely to see this really end.”
Among the Dow’s components, General Motors shares plunged 31% after the auto maker’s credit ratings and those of its financing unit were put on watch for downgrade by Standard & Poor’s. The Dow’s financial components suffered as well, with Citigroup dropping 10% and Bank of America falling 11.2%. Exxon Mobil shares fell 11.7% after the front-month crude-oil futures contract settled at $86.59, the lowest settlement since Oct. 23, 2007. Investors worry economic aftershocks from the credit crisis will curb demand for fuel.
Investors are generally skeptical that the vast sums of government money that are being pumped into the financial system will do much to unfreeze the credit markets. Economists fear that with companies frozen out of short-term funding sources, a severe recession could result. Markets are beginning to price in such a scenario, analysts say.
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