It's 4 p.m. EST, do you know where your stocks finished? You might not want to find out. On the heels of a global market meltdown, the Dow Jones Industrial Average closed lower by 318 points, or 3.1%, to 9,973 -- the first time it's finished below 10,000 since Oct. 18, 2000. The Nasdaq Composite Index, which is nearly 60% off its all-time high, ended behind 43 points, or 2.1%, to 1,972 -- the second time it's closed below 2,000 this week.
This morning, international credit rating agency
put 19 Japanese banks under negative review, citing growing concern over the impact of falling share prices and bad loans. Worries about European and U.S. exposure to those banks -- which could include anything from loans to Japanese companies, to currency positions, or even the simple fact of doing business in Asia -- rocked market indices on both continents.
If only it was just beef Europe had to worry about. As a result of the credit scare, London's
ended down 125 points, or 2.2%, to 5596 -- its lowest close since Dec. 1998. Germany's
was also hit hard, ending down 113 points, or 2%, to 5127. And Paris'
lost 60 points, or 1.2%, to 5127.
Elsewhere, rumors that the
Bank of Japan
is in emergency talks with a large financial institution and an earnings downgrade on European banks by
helped send global markets into a tailspin. During the day, traders talked about massive selling from a hedge fund, not yet identified, that was long European stocks.
On Wall Street, morale was very low today. "Investors were as intent to get out of the market as they were to get in a year ago," said Tom Gallagher, head of U.S. equity sales and trading at
CIBC World Markets
. "We're at the opposite end of the emotional extreme."
Despite several attempts to rally, the Dow Jones closed near its daytime lows. Even as the
blue-chip measure managed 100-point swings, traders said there was no catalyst to take the market higher. For many investors, the question became: Why buy stocks? Headed into the close, few found a reason to do so.
The good news: On the heels of today's selloff, market watchers foresee steeper interest rate cuts from the
Federal Reserve to get the economy back on track. The majority of economists had been expecting the Fed to drop the
fed funds rate by 50 basis-points to 5% when it meets on Tuesday, but the
fed fund futures contract, a good proxy for monetary policy, is now pricing in more than a 50% chance for a 75-basis point interest rate cut.
For his part, Tony Crescenzi, chief bond market strategist at
, said he would not be surprised if the Fed cut rates by more than 75 basis-points next week since the global pain signals potential systemic weakness. "The Fed can't sit back and allow confidence to deteriorate," he said. Crescenzi does not rule out the possibility of a rate-ease before Mar. 20. "The fact that they prefer to act at meetings doesn't mean they won't cut rates before, as Greenspan showed us back in January."
According to Crescenzi, today's volume levels did not suggest capitulation, typically defined as a selling spree momentous enough to take stocks down so low that they look cheap again. The last time that happened was Sep. 1, 1998. On that day, the Dow Jones hit rock bottom, or 7,400, on volume of 1.2 billion shares -- twice the six-month volume average on the
New York Stock Exchange at that time -- and then came back to close at 7,827. If that kind of rally were to take place today, volume levels would have to rise above 2 billion shares by those standards.
The roster of stocks that got hit spread far and wide. To be sure, bank stocks were smacked by the selloff: The
Philadelphia Stock Exchange/KBW Bank Index
, which tracks large banks, closed down 5.4%.
Bank of America
lost 4.6% to $51.75,
J.P. Morgan Chase
fell 7.7% to $43.75, and
sank 7.2% to $44.90.
Every single Dow stock was trading down this afternoon. The biggest drags on the blue-chip index were
, which ended down 5.4% to $75 and
, which closed behind 4.2% to 50.02.
Elsewhere, technology stocks were not immune.
shed 0.2% to 54,
decreased 5.3% to $20.25, and
slid 0.9% to $29.06.
More Earnings Warnings
Amid weakening fundamental conditions across the economy, earnings warnings have become the rule rather than the exception. According to earnings tracker
First Call/Thomson Financial
, close to 500 companies have issued profit warning this preannouncement season. For many CEOs, the problem remains a lack of visibility about their financial future.
scaled back its 2001 earnings-per-share estimate, citing problems in Europe caused in part by outbreaks of mad cow disease and foot-and mouth-disease. McDonald's closed lower by 0.9% to $27.55.
said after the close of regular trading yesterday that its fiscal first-quarter and full-year earnings would fall below expectations, due to bad weather in the Northeast and Southeast. It had lately lost 9.3% to $28.75.
fell 2% to $11.02, after the company said it's considering selling or merging its optical fiber business,
Optical Fiber Solutions.
Among those thought to be interested in bidding for the company are
, down 2.5% to $23.98, France's
, lower by 2.9% to $35.93,
, up 0.5% to $24.56, and Italy's
Carnage spilled across every sector of the market today, with bank, retail and transport indices suffering the worst blows. The
Dow Transportation Average
finished down 3.2%, on the heels of a profit warning from
-- off 5.4% to $19.75. The
S&P Retail Index
closed behind 2.2%.
Even defensive sectors saw very little relief. The
S&P Tobacco Index
dropped 2.7%, and the
Amex Pharmaceutical Index
lost 2.4%. Commodity-related indices were poor, as the
Philadelphia Stock Exchange Forest & Paper Products Index
lost 2.8%, the
S&P Chemical Index
fell 2.9%, and the
Amex Oil & Gas Index
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