Stocks fell sharply on Wall Street again today in the latest reverberations of the crunch in the American credit market.
After the Dow Jones industrial average dropped more than 300 points in early-afternoon trading, stocks pared their losses. At 2 p.m., the Dow was down more than 133 points, or 1 percent. And the Standard & Poor’s 500-stock index and the Nasdaq composite were down by comparable amounts.
But today’s declines still left the indexes on the cusp of a 10-percent drop since their peak last month — the threshold at which the market’s fall is considered to have reached a correction.
The losses came amid a bruising week for stocks, and a day after the market plunged in the final hour of trading, with the Dow closing off 167 points and the S.& P. 500 erasing its own gains for the year.
That set the tone for a wild ride in foreign financial markets overnight. The main stock indexes in nearly every developed nation around the world closed lower or were headed toward finishing the day in the red.
On Wall Street today, few stocks were left untouched. Share values of blue-chip companies like Apple, Exxon, Boeing and I.B.M. all suffered significant losses. The New York Stock Exchange imposed curbs on trading, a move to prevent wider losses when volatility spikes.
Of course, this is not due to credit cards as such, but it is due to a certain mindset, or – at least – that is what it seems like to me. Loaning money to invest. But what if the stock market fails? Anyway,
Adding to an already tense environment, more problems became apparent in the mortgage market today. Countrywide Financial, the nation’s largest mortgage lender, said it had tapped $11.5 billion in emergency loans from 40 of the world’s largest banks, as it seeks to shore up its cash position.
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The reversal of fortune in the housing market was further illustrated by figures released by the Commerce Department today that showed construction of new homes fell in July to the lowest level in more than a decade, dropping 6.1 percent last month.
The Federal Reserve injected $17 billion into the system this morning in two open-market actions by lending against mortgage securities.
Whether the turbulence in financial markets will have larger ramifications for the American economy is still unclear. Many economists, including those at the Fed, have said they believe the damage will remain contained. Each day that stocks take a pummeling, however, the outlook becomes more and more murky.
For now, experts seem to believe that a recession is not likely. That does not mean out of the question. Meanwhile:
In Europe today, the FTSE-100 in London fell more than 4 percent in afternoon trading, while the CAC-40 of France dropped 3.3 percent and the DAX in Germany was down more than 2 percent. The Asian slump was led by a nearly 7 percent decline in South Korea as nervousness spreading there from finance professionals to ordinary small investors.
I am not so sure about the likelihood of a recession. Once people start panicking, stockmarkets can really take a dive. And it seems to me that people are panicking.
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