Updated from 4:10 p.m. EDT
U.S. stocks plummeted violently Monday, as it became apparent that the credit crisis had spread beyond America and into Europe and Asia. In the last hour, the major indices rallied off the worst of their lows for the day, but they still ended in deeply negative territory.
The Dow Jones Industrial Average broke below 10,000 for the first time since October 2004, and fell as much as 800 points during the session, marking the largest intraday point decline in the history of the index.
In the end, the Dow closed with a loss of 369.88 points, or 3.6%, at 9955.50. The S&P 500 gave back 42.38 points, or 3.9%, to 1056.85. The Nasdaq dropped 84.43 points, or 4.3%, to 1862.96.Breadth was frightful. Decliners trounced advancers 32-to-1 on the New York Stock Exchange. On the Nasdaq, decliners beat advancers 11-to-1. All 30 components of the Dow posted a loss for the day. 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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