Wall Street has ended still another highly volatile session with a big loss as the market’s stubborn worries about a protracted downturn in the economy and tight credit markets erased gains in the financial sector.
The Street’s back-and-forth trading was typical for a turbulent market that has seen many recent rallies evaporate. The market’s moves came on relatively light volume.
The Dow Jones industrial average is ending down about 203 points at the 8,175 level, after alternating between losses and gains throughout the day. Banks got a boost earlier in the session after the Treasury said it signed agreements with nine financial institutions to buy stock in the companies this week.
An upbeat home sales report also gave the market support until late afternoon.
Investors around the world are anxious that the evaporation in available credit in the past month has hurt lending to the point where it will be difficult for the country to avoid a recession. But the U.S. government is carrying out some of its measures this week to help the banking sector.
Monday moring, the Dow opened down again amid worries about the health of the global economy – and after a week in which the stock market lost $800 billion in value.
Never mind that the feds are about to inject $125 billion of the $700 billion in bailout bucks that Congress approved last month into nine U.S. banks to unclog credit lines and jump start the economy.
When the opening bell sounded, fear still reigned on the trading floor on reports that the finances of oil-rich Arab nations are also foundering due to collapsing oil prices.
The sell-off came after as the seven leading industrial nations issued a statement warning about the “recent excessive volatility” in the value of the Japanese yen.
The A7 said it would “cooperate as appropriate,” stirring speculation of an orchestrated intervention to help stabilize currency markets.
Congress passed a historic $700 billion bailout package on Oct. 3 to solve the worst financial crisis since the Great Depression – a fiscal calamity caused by bad debts from runaway mortgage lending that was abetted by lax government oversight.
Lawmakers pressured a reluctant President Bush to buy a stake in the banks a rather than simply save the skins of the bankers by buying up their bad debts.
Last week, former Fed Chairman Alan Greenspan warned that the financial markets were engulfed in a “once-in-a-century credit tsunami” and said he was “shocked” his hands-off-the-markets approach helped tank the economy.
The White House has been reluctant to utter the “R” word – recession – to describe the state of the economy.
Many economists believe a recession is inevitable – if not underway – and Wall Street is on track for its worst month since the 1930s.
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