Stocks Pare Steepest Losses of the Day
Updated from 2:48 p.m. EDT
U.S. stocks dropped violently Monday, as it became apparent that the credit crisis had spread beyond America into Europe and Asia.
The Dow Jones Industrial Average broke below 10,000 for the first time since October 2004, falling as much as 800 points during the session. In the last hour of trading, however, the major indices were easing off their lows. The Dow was down 426 points at 9898. The S&P 500 gave back 48 points to 1050. The Nasdaq dropped 91 points to 1855.
In a sign of a global financial crunch, leaders from France, Germany, Italy and the U.K. met Saturday and agreed to coordinate efforts to prevent failures by Europe's banking institutions.A scramble ensued to help troubled institutions. Germany rescued lending company Hypo Real Estate, and France's BNP Paribas said it would take over Benelux bank Fortis NV. Germany's chancellor, Angela Merkel, announced that Germany would guarantee all of its private bank deposits. On Monday, Denmark followed suit. Back in the U.S., the Federal Reserve was initiating its own plans Monday to prop up stagnant credit markets. The central bank announced it would pay interest on bank reserves it holds and expand its term auction facilities program. Meanwhile, The Wall Street Journal said that Treasury Secretary Henry Paulson would appoint adviser Neel Kashkari to supervise the $700 billion bailout program for the financial system. Paulson's proposal passed the House of Representatives and was signed by President Bush on Friday. Stocks sold off sharply shortly after the bill passed. "What's different today is the bailout package came and went, and it's not going to solve the problem," said Bill Fleckenstein, hedge fund manager at Fleckenstein Capital Management. He said the selloff into the close Friday indicated that stocks are trending lower. "If we wind up having a crash the next couple days I wouldn't be surprised. That's what the tipoff from Friday was," he said.
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