Wall Street in freefall

 

NEW YORK: Wall Street stocks plunged yesterday, giving back most of their gains from the past week, amid bleak economic news from around the globe including confirmation of a recession in the United States.

The Dow Jones Industrial Average sank 679.95 points (7.70 per cent) to close at 8,149.09, in the fourth-steepest point loss in history for the blue-chip index.

The Nasdaq composite plummeted 137.50 points (8.95 per cent) to 1,398.07 and the broad-market Standard & Poor’s 500 index sank 80.03 points (8.93 per cent) to 816.21.

A pullback was expected after a huge snapback rally over the past several sessions, with the Dow posting its best five-day percentage increase since 1932 of 17 per cent. But selling began early and quickly became a freefall.

Market action came as the economic panel recognised as the arbiter of business cycles said the US had entered recession in December 2007 based on its measure of income, employment and other factors.

“The market has gotten off to a tough start to the week today, as recession fears have now become a reality, and the questions that remain are just how bad and for how long this recession will linger over us,” said Michael Fowlkes, analyst for the online investment service Investors Observer.

Also, a survey of the manufacturing sector showed the weakest conditions since 1982.

European markets were also sharply weaker, as the rally from last week came to a grinding halt after news of deeper economic woes in Germany, France and the full 15-nation eurozone and weak data from India and China.

Jocelynn Drake at Schaeffer’s Investment Research said the market responded to “a round of weak economic data around the globe that has stoked concerns that we may not have seen the worst of the economic slowdown.”

Fresh data released yesterday showed German retail sales fell 1.6 per cent in October from the previous month, while in France a closely watched index of manufacturing activity fell to 37.3 in November, its worst-ever reading.

In China, manufacturing activity hit a three-year low in November, underlining the fallout of the global financial crisis on emerging markets.

Meanwhile, India’s exports in October tumbled 12 per cent from a year ago for the first time in three years, hit by slumping demand in its key US and European markets.

Augustine Faucher at Moody’s Economy.com said the confirmation of a US recession by the National Bureau of Economic Research only added to the gloom.

“The important questions now are when will the recession end and how severe will it be,” he said.

“Moody’s Economy.com expects the current downturn to last through the first half of 2009 and to be the worst of the post-World War II era. Even with a substantial stimulus package, unemployment is likely to peak close to 9.0 per cent in early 2010.” - AFP