Last updated: October 15, 2008 10:24 pm
US stocks plunged yet again on Wednesday on fresh concerns that the vast government intervention in the financial system may not be enough to stem the credit crisis.
Fears also persisted that it had in any case come too late to prevent severe and long-lasting recession. Retailers Nordstrom, Macy’s and Bed, Bath & Beyond suffered some of the heaviest falls in the fall-out from grim retail sales data, down 12.4 per cent to $16.54, 17.5 per cent to $8.66 and 11 per cent to $23.89 respectively.
In spite of better-than-exexpected corporate earnings in the sector, financials slumped 9 per cent overall.
Citigroup and Morgan Stanley – which bounced 21.2 per cent and 16.5 respectively in the previous session – retreated 12.8 per cent to $16.23 and 16.3 per cent to $18.13 after Oppenheimer warned that the government’s bank rescue was not a “panacea’’ for all ills.
The major indices opened lower and sold off sharply towards the close, a hallmark of recent slumps that traders put down, in part, to another wave of mutual fund redemptions. The S&P 500 closed down 9 per cent at 907.84. The Dow Jones Industrial Average was 7.9 per cent down at 8,577.91 while the Nasdaq Composite Index was 8.5 per cent lower at 1,628.33.
The Chicago Board Options Exchange Volatility index, known as Wall Street’s fear gauge, shot up 24.8 per cent to 68.78, a figure that indicates severe distress.
The bloody retreat over the past two sessions erased virtually all of the gains from Monday, itself the biggest rise since the Depression.
Energy and materials were the biggest laggards, down 15.5 and 12.1 per cent respectively, on mounting concerns of a global slowdown. US Steel sank 17.7 per cent to $38.82.
“There can be no doubt now that the economy is in recession,” said Ian Shepherdson, economist at High Frequency Economics. “It will be there a while.”
Financials took scant comfort from JPMorgan Chase , which fell 5.5 per cent to $38.49, even after its earnings exceeded expectations. Wells Fargo which also did better than forecast, held on to gains for much of the session but closed down 0.5 per cent at $33.35.
State Street, one of nine institutions in which the government will take an equity stake, sank 17.4 per cent to $46.83 after the group warned of unrealised off-balance sheet losses.
Elsewhere, Coca-Cola was the only stock in the Dow to find positive territory, up 1.1 per cent to $44.21 after the soft drinks group’s quarterly profit compared favourably with a glum outlook from PepsiCo the previous day. PepsiCo lost a further 5.8 per cent to $51.25 after a 11.9 per cent slide in the previous session.
Intel’s relatively well received results failed to boost Dell, which lost 10.65 per cent to $12.58.
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