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Dow Jones Sinks 504 Points for Worst One Day Loss Since 9/11
The stock market plummeted today as paniced investors reacted on news of Lehman Brothers Holdings Inc. bankruptcy filing and news of a forced sale of Merrill Lynch to Bank of America for $50 billion in stock. The Dow Jones Industrial Average sank under $11,000 to $10,917, a whalloping 4.42% loss for the major index. Tech stocks on the NASDAQ didn’t fare much better with the index losing 81.36 points or 3.60% of it’s value from the previous trading day. The losses today were the major indexes worst single day point drops since the September 2001 terrorist attacks.
The chilling effect was not felt solely in the US Markets as stocks also posted big losses in markets across much of the world. Investors remain anxious about American International Group Inc. (AIG), which is seeking emergency government funding to bail them out. A potential shutdown of the world’s largest insurance provider would likely have dire implications far beyond the scope of the Lehman Brothers bankruptcy which is the largest US bankruptcy on record.
“I think as we get closer to the close, people continue to get more nervous,” said Ryan Larson, senior equity trader at Voyageur Asset Management, a unit of RBC Dain Rauscher. “People sense that there is still a lot more pain to be felt.”
In other circles, Treasury Secretary Henry Paulson said Monday the American people can remain confident in the “soundness and resilience in the American financial system.”
Despite the bloodletting on Wall Street, Treasury bond prices soared on Monday and Oil prices closed below $100 a barrel, a 7 month low. Crude prices have now essentially given up all of their gains for the year, extending a steep, two-month long slide from record levels above $147 a barrel to today’s current position.
Economists say the Fed is preparing to meet Tuesday to once again cut a key interest rate this week or possibly later this year as a result of the carnage on Wall Street. In an effort to calm investors worries, the hugely unpopular President Bush assured the country his administration is “working to reduce disruptions and minimize the impact of these developments on the broader economy.”
by Syd
I have a feeling that most of the fallout will stay within the financials and it won’t have the massive overall impact people are fearing.
I know it sounds strange to believe in an isolated impact when you’re talking about a sector like the financials, but I think those outside are positioned to avoid total meltdown.
My probably-silly prediction: Everything drops big for 2-3 days. Slight rebound. Then an uptick across the board over the next few months.
by C4G
Syd, I agree with you. This damage is isolated within the financials industry, particularly in regards to the lending industry. The impact across other industries will be minimal, with only the weakest companies in other industries feeling the effect from a slowdown in VC lending.
Funny, I was watching the news today and they said the only company that was up today was McDonalds !!
by custom research paper
I know it sounds strange to believe in an isolated impact when you’re talking about a sector like the financials, but I think those outside are positioned to avoid total meltdown.
by Josef Redaktion
When listening to coverage on Lehmann Bros. and other players in the industry, I can’t help but draw some lines towards Enron. Enron was claimed to be the best managed large company in US and Canada, just as Lehmann Bros. was supposedly one of the most secure financial institutions. This makes me ask questions as to what was really going on.
In regards to the markets taking a hit, yes, I know that this is the largest fall since 9/11, however, I think some important lessons have been learned from that time. Citizens know that the market falls when faith in it is lost, and people stop contributing to it.
I think the Fed’s move to help AIG was a smart move.
by Mirt
Whats interesting is that some of the financials are doing ok. Wells Fargo seems to have for the most part weathered the whole crisis.
by Mirt
Whats interesting is that some of the financials are doing ok. Wells Fargo seems to have for the most part weathered the whole crisis.
by Dissertation Help
I can’t help but draw some lines towards Enron. Enron was claimed to be the best managed large company in US and Canada, just as Lehmann Bros. was supposedly one of the most secure financial institutions.
by Alex
I know that this is the largest fall since 9/11, however, I think some important lessons have been learned from that time. Citizens know that the market falls when faith in it is lost, and people stop contributing to it.
I think the Fed’s move to help AIG was a smart move.