Saorsa
30th September 2008, 11:39
For U.S. stocks, worst single-day drop in two decades
http://www.iht.com/articles/2008/09/29/business/30markets.php?page=1
Even before the opening bell, Monday looked ugly.
But by the time that bell sounded again on the New York Stock Exchange, seven and a half frantic hours later, $1.2 trillion had vanished from the United States stock market.
What had started 24 hours earlier, with a modest sell-off in stock markets in Asia, had turned into Wall Street's blackest day since the 1987 crash. The broad market, as measured by the Standard & Poor's 500-stock index, plunged almost 9 percent, its third-biggest decline since World War II. The Dow Jones industrial average tumbled nearly 778 points to 10,365.45.
Across Wall Street, no one could quite believe what was happening on the floor — the floor of the House of Representatives, not the New York Exchange.
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As lawmakers began to vote on a $700 billion rescue for financial institutions, the trading desk at Voyageur Asset Management in Chicago went silent. Money managers gaped at a television screen carrying news that seemed unthinkable: the bill was not going to pass. Shortly after 1:30 p.m., the rescue was rejected."You just felt like the world was unraveling," Ryan Larson, the firm's senior equity trader, said. "People started to sell and they sold hard. It didn't matter what you had — you sold."
Frustration, and then panic, coursed through the markets. Investors feared the decision in Washington would imperil the financial industry, as well as the broader economy.
At the Federal Reserve and other central banks, policy makers were also anxious. Even before the vote on Capitol Hill, central bankers tried to jump-start the credit markets. They offered hundreds of billions of dollars in loans to banks around the world because banks and investors were unwilling to lend to each other. But neither the stock market nor the credit markets appeared to respond.
Just 24 hours earlier, few imagined Monday would play out this way.
On Sunday afternoon, Treasury Secretary Henry Paulson Jr., and the House speaker, Nancy Pelosi, announced they had agreed on the terms of a bailout.
But while congressional aides and lawmakers worked on the details, the credit crisis that began more than a year ago in the American mortgage market was setting off new alarms in Europe.
Shortly before 6 p.m. New York time on Sunday, Belgium, the Netherlands and Luxembourg agreed to invest $16.2 billion to rescue a big bank, Fortis. A few hours later, the German government and a group of banks pledged $43 billion to save Hypo Real Estate, a commercial property lender. At 2:50 a.m., news came that the British Treasury had seized the lender Bradford & Bingley and sold the bulk of it to Banco Santander of Spain.
"We will continue to do what is necessary," a somber Gordon Brown, the British prime minister, told reporters at 10 Downing Street in London. "The stability of the system comes first. We need a stable financial system."
In Tokyo, where stocks had opened higher in early trading on Monday, worries quickly set in. Traders returned from lunch to reports suggesting the financial crisis was taking a toll on the global economy. Markets across Asia began to sell off.
In Tokyo, the Nikkei 225 sank 1.5 percent. In India, stocks fell nearly 4 percent. In Hong Kong, where a big bank, HSBC, raised key lending rates because of the turmoil in the credit markets, the Hang Seng index tumbled nearly 4.3 percent.
As the drama unfolded in Asia, a major American bank was in trouble. Regulators in Washington were rushing to broker the sale of Wachovia to Citigroup or Wells Fargo.
At about 4 a.m., Sheila Bair, the chairwoman of the Federal Deposit Insurance Corp., called executives at Citigroup to say Wachovia was theirs.
But by this time, stocks were tumbling in European trading as investors reacted to the growing problems at financial institutions.
As investors in New York were getting up on Monday, the credit markets were again flashing red as banks reported higher borrowing costs. Investors continued to seek safety in Treasuries. The yield on one-year Treasury bills, for instance, fell to almost zero, meaning investors were willing to accept no return just for the assurance that they would get their money back.
When trading opened on the New York Exchange at 9:30 a.m., stocks immediately fell 1 percent.
Noting the stress in the money markets, worried officials at the Fed announced at 10 a.m. that the central bank would increase to $620 billion its program to lend money through foreign central banks, up from $290 billion, in order to keep credit flowing. The central bank also said it would double the money it lends out domestically through an auction program to $300 billion.
Many eyes on Wall Street turned to National City, the Cleveland-based bank, which has a $20 billion portfolio of troubled loans it is trying to sell. National City's shares plummeted 50 percent to $1.50 in early trading, prompting Peter Raskind, the bank's chief executive, to assert that the bank was sound.
"It's not overly dramatic to say that investors are panicking. You can see it in the market and we can feel it," Raskind said in an interview.
In New York, 10 executives at an investment firm, Bessemer Trust, huddled to discuss the markets. A question arose: What would it take to restore confidence to the credit markets? There were few upbeat answers, though one person said Citigroup's takeover of Wachovia could pave the way for more consolidation in banking.
"It is the type of solution that makes good sense in these challenging times," Marc Stern, Bessemer Trust 's chief investment officer, said as he recounted the meeting.
But Stern and his group would soon be dismayed by what was happening in Washington.
At 1:30 p.m. the House began to vote on the rescue package that Paulson and congressional leaders negotiated over the weekend. About 10 minutes later, when it became clear that the legislation was in trouble, the stock market went into a free fall, with the Dow plunging about 400 points in five minutes.
At his home office in Great Neck, New York, Edward Yardeni, the investment strategist, received a series of terse e-mail messages from clients and friends. "Is this the end of the world?" one asked. Another sent a simple plea: "Stop the world, I want to get off."
Yardeni and other analysts said the action in Washington left many investors discouraged and feeling powerless. "You can come into the office and spend a lot of time researching companies, trying to understand them. You've got a portfolio that you think should do well," he said. "And none of that matters."
Marc Groz, chief executive of Topos Partners, a hedge fund in Stamford, Connecticut, put it this way: "It's frustrating for someone like me because I don't have a pipeline to what is happening in Washington, D.C."
The stock market briefly rallied, then slowly lost ground through the afternoon. A flurry of sales minutes before the close sent the Dow down 200 points, to its lowest level for the day.
Shortly after the closing bell rang on the floor of the Big Board, Paulson, looking exhausted, spoke to reporters at the White House. He lamented the vote, but vowed to keep pressing Congress for a broad rescue plan to help alleviate stress in the credit markets, which he said was impairing the ability of businesses to "meet payroll and to purchase inventories" and making it harder for consumers to get car and student loans.
On Tuesday morning in Asia, however, the Japanese stock market fell nearly 5 percent in early trading.
Vikas Bajaj, Keith Bradsher and Matthew Saltmarsh contributed reporting.
http://www.iht.com/articles/2008/09/29/business/30markets.php?page=1
Even before the opening bell, Monday looked ugly.
But by the time that bell sounded again on the New York Stock Exchange, seven and a half frantic hours later, $1.2 trillion had vanished from the United States stock market.
What had started 24 hours earlier, with a modest sell-off in stock markets in Asia, had turned into Wall Street's blackest day since the 1987 crash. The broad market, as measured by the Standard & Poor's 500-stock index, plunged almost 9 percent, its third-biggest decline since World War II. The Dow Jones industrial average tumbled nearly 778 points to 10,365.45.
Across Wall Street, no one could quite believe what was happening on the floor — the floor of the House of Representatives, not the New York Exchange.
http://ad.fr.doubleclick.net/ad/business.iht.com/article;cat=article;sz=190x90;ord=12227689944385? (http://ad.fr.doubleclick.net/jump/business.iht.com/article;cat=article;sz=190x90;ord=12227689944385?)
As lawmakers began to vote on a $700 billion rescue for financial institutions, the trading desk at Voyageur Asset Management in Chicago went silent. Money managers gaped at a television screen carrying news that seemed unthinkable: the bill was not going to pass. Shortly after 1:30 p.m., the rescue was rejected."You just felt like the world was unraveling," Ryan Larson, the firm's senior equity trader, said. "People started to sell and they sold hard. It didn't matter what you had — you sold."
Frustration, and then panic, coursed through the markets. Investors feared the decision in Washington would imperil the financial industry, as well as the broader economy.
At the Federal Reserve and other central banks, policy makers were also anxious. Even before the vote on Capitol Hill, central bankers tried to jump-start the credit markets. They offered hundreds of billions of dollars in loans to banks around the world because banks and investors were unwilling to lend to each other. But neither the stock market nor the credit markets appeared to respond.
Just 24 hours earlier, few imagined Monday would play out this way.
On Sunday afternoon, Treasury Secretary Henry Paulson Jr., and the House speaker, Nancy Pelosi, announced they had agreed on the terms of a bailout.
But while congressional aides and lawmakers worked on the details, the credit crisis that began more than a year ago in the American mortgage market was setting off new alarms in Europe.
Shortly before 6 p.m. New York time on Sunday, Belgium, the Netherlands and Luxembourg agreed to invest $16.2 billion to rescue a big bank, Fortis. A few hours later, the German government and a group of banks pledged $43 billion to save Hypo Real Estate, a commercial property lender. At 2:50 a.m., news came that the British Treasury had seized the lender Bradford & Bingley and sold the bulk of it to Banco Santander of Spain.
"We will continue to do what is necessary," a somber Gordon Brown, the British prime minister, told reporters at 10 Downing Street in London. "The stability of the system comes first. We need a stable financial system."
In Tokyo, where stocks had opened higher in early trading on Monday, worries quickly set in. Traders returned from lunch to reports suggesting the financial crisis was taking a toll on the global economy. Markets across Asia began to sell off.
In Tokyo, the Nikkei 225 sank 1.5 percent. In India, stocks fell nearly 4 percent. In Hong Kong, where a big bank, HSBC, raised key lending rates because of the turmoil in the credit markets, the Hang Seng index tumbled nearly 4.3 percent.
As the drama unfolded in Asia, a major American bank was in trouble. Regulators in Washington were rushing to broker the sale of Wachovia to Citigroup or Wells Fargo.
At about 4 a.m., Sheila Bair, the chairwoman of the Federal Deposit Insurance Corp., called executives at Citigroup to say Wachovia was theirs.
But by this time, stocks were tumbling in European trading as investors reacted to the growing problems at financial institutions.
As investors in New York were getting up on Monday, the credit markets were again flashing red as banks reported higher borrowing costs. Investors continued to seek safety in Treasuries. The yield on one-year Treasury bills, for instance, fell to almost zero, meaning investors were willing to accept no return just for the assurance that they would get their money back.
When trading opened on the New York Exchange at 9:30 a.m., stocks immediately fell 1 percent.
Noting the stress in the money markets, worried officials at the Fed announced at 10 a.m. that the central bank would increase to $620 billion its program to lend money through foreign central banks, up from $290 billion, in order to keep credit flowing. The central bank also said it would double the money it lends out domestically through an auction program to $300 billion.
Many eyes on Wall Street turned to National City, the Cleveland-based bank, which has a $20 billion portfolio of troubled loans it is trying to sell. National City's shares plummeted 50 percent to $1.50 in early trading, prompting Peter Raskind, the bank's chief executive, to assert that the bank was sound.
"It's not overly dramatic to say that investors are panicking. You can see it in the market and we can feel it," Raskind said in an interview.
In New York, 10 executives at an investment firm, Bessemer Trust, huddled to discuss the markets. A question arose: What would it take to restore confidence to the credit markets? There were few upbeat answers, though one person said Citigroup's takeover of Wachovia could pave the way for more consolidation in banking.
"It is the type of solution that makes good sense in these challenging times," Marc Stern, Bessemer Trust 's chief investment officer, said as he recounted the meeting.
But Stern and his group would soon be dismayed by what was happening in Washington.
At 1:30 p.m. the House began to vote on the rescue package that Paulson and congressional leaders negotiated over the weekend. About 10 minutes later, when it became clear that the legislation was in trouble, the stock market went into a free fall, with the Dow plunging about 400 points in five minutes.
At his home office in Great Neck, New York, Edward Yardeni, the investment strategist, received a series of terse e-mail messages from clients and friends. "Is this the end of the world?" one asked. Another sent a simple plea: "Stop the world, I want to get off."
Yardeni and other analysts said the action in Washington left many investors discouraged and feeling powerless. "You can come into the office and spend a lot of time researching companies, trying to understand them. You've got a portfolio that you think should do well," he said. "And none of that matters."
Marc Groz, chief executive of Topos Partners, a hedge fund in Stamford, Connecticut, put it this way: "It's frustrating for someone like me because I don't have a pipeline to what is happening in Washington, D.C."
The stock market briefly rallied, then slowly lost ground through the afternoon. A flurry of sales minutes before the close sent the Dow down 200 points, to its lowest level for the day.
Shortly after the closing bell rang on the floor of the Big Board, Paulson, looking exhausted, spoke to reporters at the White House. He lamented the vote, but vowed to keep pressing Congress for a broad rescue plan to help alleviate stress in the credit markets, which he said was impairing the ability of businesses to "meet payroll and to purchase inventories" and making it harder for consumers to get car and student loans.
On Tuesday morning in Asia, however, the Japanese stock market fell nearly 5 percent in early trading.
Vikas Bajaj, Keith Bradsher and Matthew Saltmarsh contributed reporting.