Updated from 9:27 a.m. EDTStocks on Wall Street opened to the downside Friday, as the credit crisis wore on and financial stocks, hammered all week, looked ready to take another drubbing. The Dow Jones Industrial Average was sinking 125 points at 8453, and the S&P 500 was losing 14 points at 895. The Nasdaq was down 17 points at 1627. After a day of whipsaw trading, stocks sold off hard into the close Thursday. Skepticism about government intervention in the financial markets and heavy selling of financial and insurance stocks contributed to declines in the major indices. The Dow Jones Industrial Average dropped 7.3%, the S&P 500 gave back 7.6%, and the Nasdaq tumbled 5.5%. Battered financial firms Morgan Stanley ( MS) and Goldman Sachs ( GS) look to again be in focus ahead of the new day's trading. Ratings agency Moody's said it may cut Morgan Stanley's credit rating, and lowered its credit outlook for Goldman to negative. Amid the increasing concern about banks, the U.S. government was considering guaranteeing bank debt and insuring all domestic bank deposits, according to a report in The Wall Street Journal. The report precedes a meeting of the Group of Seven industrial nations Friday. The economic powers plan to discuss a coordinated response to the global credit crisis. Traders were closely eying an auction of credit default swaps related to bankrupt brokerage Lehman Brothers. The auction is expected to bring heavy losses to sellers of the swaps, which function as insurance against a default on company defaults on their debt. The market for these derivatives has been tied up as credit markets remain tight. The cost of borrowing among banks as measured by three-month Libor was still rising. The three-month rate climbed 7 basis points to 4.82%, according to Bloomberg.com. Following a heated battle with Citigroup ( C), Wells Fargo ( WFC) appeared set to buy Wachovia ( WB) unencumbered. Citigroup said it will continue to pursue $60 billion in damages for breach of contract but would not try to overturn a merger between Wells Fargo and Wachovia. Citi had announced a Wachovia acquisition on Sept. 29, only to trumped days later by a new bid from Wells. The Journal also reported that insurance firm AIG ( AIG) took out an additional $9 billion in government loans, bringing its total borrowing from the U.S. in the past three weeks to $70.3 billion. The company continues to attempt to sell its assets in a struggle to stay afloat.
Earnings season continued amid the financial turmoil, as industrial bellwether General Electric ( GE) reported third-quarter earnings that declined 12% year over year but were in line with revised estimates. As for analyst actions, Wells Fargo, along with insurance and credit services firms such as State Auto ( STFC), Erie Indemnity ( ERIE), Donegal Group ( DGICA) and Advanta ( ADVNB) all caught upgrades from Stifel Nicolaus. Looking at economic data, the Census Bureau's report on the trade balance for August showed a deficit of $59.1 billion, whereas the economy registered a $62.2 billion deficit in July. Economists had anticipated an August deficit of $59 billion. The Bureau of Labor Statistics also reported that export prices excluding agricultural goods declined 1% in September. Import prices excluding oil dropped 0.9%. In commodities, crude oil was down $7.41 to $79.18 a barrel. Gold was climbing $25.50 to $912 an ounce. Longer-dated U.S. Treasury securities were mixed. The 10-year was down 12/32 to yield 3.83%, and the 30-year was gaining 16/32, yielding 4.07%. The dollar was climbing vs. the euro and pound, but falling sharply against the yen. Overseas, European markets were taking it on the chin. The FTSE in London and the DAX in Frankfurt were each down at least 8.8%. In Asia, Japan's Nikkei and Hong Kong's Hang Seng also closed with broad losses.