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Dow Loses 391 Points

Dow Loses 391 Points

 

The Dow Jones Industrial Average fell as much as 500 points on Thursday amid news of declines in Asian and European stocks and ever-growing fears of a second recession. After alate rally, the Dow “only” closed down 391 points.The Standard & Poor’s 500-stock index fell 3.2 percent and the technology-orientated Nasdaq Composite was also down 3.2 percent.

Overall, the Dow has fallen 6.74 so far this week. Its losses on Thursday were preceded by a slump throughout Europe.London’s FTSW 100 index fell 246 points, or 4.67 percent, to close at 5041, its worst fall percentage-wise since March 2009 and its biggest fall in points since November 2008, after thecollapse of Lehman Brothers. TheGerman Dax lost 4.9 percent and France’s Cac, 5.2 percent.

Fed Introduces Operation Twist

The Federal Reserve warned that the US faces “significant downside risks” on Wednesday, the day that it unveiledOperation Twist. This planis intended to stimulate the sputtering US economy by selling $400 billion in shorter-term bonds and using the proceeds for longer-term government bonds. By doing so, the Fed hopes to keep long-term interest rates low in order to boost loans to business and mortgage rates.

But Operation Twist does not inject any new money into the economy, a move that some analysts thought the Fed would make throughquantitative easing. The markets indicated that they wanted something more aggressive, as the Dow fell 80 points on Wednesday on the news, followed by a brief recovery — but this was really the start of “massive sell-off” that continued straight into Thursday.

IMF and World Bank Chiefs Call For Quick Action, Say World Economy Is In a “Danger Zone”

On Thursday, the head of the IMF, Christina Lagarde, told a news conference at the organization’s annual US meeting that the “path to recovery is narrower than three years ago” when the economies of industrialized nations sank into recession. Financial leaders need, she said, to take immediate action about “fiscal consolidation, the repair of household debt, and reforms of the public sectors.” The head of the World Bank, Robert Zoellick, also sounded the alarm, saying that the world economy is headed into a “danger zone.” While Zoelick said a double-dip recession is “unlikely” he then added these disquieting words:

“My confidence in that belief is being eroded daily by the steady drip of poor economic news.”

The IMF also lowered growth estimates for the US, Europe and Japan.Data released on Thursday reveals that, for the first time in three years, the private sector in the eurozone contracted and, for the past three months, manufacturing also has slowed in China.

US Treasury Secretary Timothy Geithner pinpointed the eurozone crisis and the political divisions in the US as the greatest threats to the global economy. Noting that, in early 2011, high oil prices and the tsunami in Japan had slowed economic growth, Geither said that these concerns had faded, while the crises in Europe and the US remain as “clouds” and potentially very stormy ones.

A Very Uncertain Future

Investors are speaking of volatility in the markets becoming the “new normal.” SaidLouise Cooper, markets analyst at BGC Partners:

“The future is so uncertain the world could look significantly different in a month’s time. Greece could have defaulted, we could be in the middle of a banking crisis a bank could have even gone bust.”

NASA’s UARS is predicted to touch down on Earth sometime Friday evening — but how much farther do stocks have to fall before a really big crash occurs?

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44 comments

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6:42PM PDT on Sep 25, 2011

Everyone should just chill out over the stock market- it is basically legalized gambling- the people who buy and sell six times in a day should be banned- it should be an investment in companies you believe in, not hedge funds and insider trading...

5:29PM PDT on Sep 25, 2011

The second recovery summer sputters out and SecTres Geitner attempts to lecture the world on how to "fix" their economy...any reason for them to listen to US?

Europe is failing as predicted. We are floundering about also as predicted repeatedly. The difference is that we aren't quite in as bad a shape as most of Europe because we have somewhat avoided the imitation of their basic economic model-government as the economic mainstay. Of course that is not for want of trying the last 3 years especially.

But never fear, another stimulus spendathon failure just means we need to tax our people more and borrow even more to keep those government/union workers employed! Keynesian spending can save us, it just never has been attempted on a big enough scale...Yep after 80 years of attempts and trillions in various currencies, we'll just keep trying to prove that borrowing/taxing money to spend in directions the brilliant minds of government tell us will work.

But meanwhile SecTreas Geitner gets pointedly ignored (better than the laughter he got in China with his assurances of the soundness of Obama economics) and the world gets more nervous watching us thrash about pointlessly spending money we no longer have.

To think I thought Bush II was a spendaholic...guess we are finding out what real spenders are now aren't we?

12:30AM PDT on Sep 25, 2011

Thanks for the article.

8:26PM PDT on Sep 23, 2011

America ... Unbelievable! You Americans bailed out 'Wall Street' with a huge chunk of taxpayers dollars and still they, 'Wall Street' perform poorly in business as usual. You want to support America by buying 'only' American made goods ... when most of those goods are now being made overseas thanks to the greedy Politicians (mostly, likely Republicans), Crummy Union Negotiators, greedy Corporate CEOs and their Board Members along with all the greedy speculating investors, all of whom are out to get rich quick at your expense. HoooRaaa! If you are smart you would get up off your duff and vote wisely in the future. Too, you may consider firing a bunch of 'politicians' and 'law makers' at the very most opportunity. Otherwise my friends, I suppose some of you could expect to be living in a tent fairly soon, while others less fortunate may be living on the streets. Wake up America!

7:47PM PDT on Sep 23, 2011

The stock market is like playing the slot machines in Vegas. I have read numerous books calling the whole economic paradigm nothing but a "house of cards"; a fabrication of mental abstractions. A whole new paradigm is severly needed but it is highly doubtful that it will materialize.

7:16PM PDT on Sep 23, 2011

All the greedy arrogant Republicans should have to loose everything and I hope they do. Recall all Republicans!

3:15PM PDT on Sep 23, 2011

Thanks for the view. If people keep hearing news of the world domination by the IMF or World Bank, why would they keep listening, and not bar the windows and doors? We should support American made products right now, in order to keep our own people employed. Let the world people pay attention to the world, while we get on with the business of living. If all we do is worry about how bad everything is, we will bury our heads in the sand. Use your vote wisely, work hard to take care of your own families and your friends, and treat everybody as you would want to be treated, and the world will be just fine. Don't worry for the things of tomorrow, for tomorrow will take care of itself. Work on today, being the best person you can be, helping, giving as you can, sharing as you are able, and this world will be healed nicely.

2:27PM PDT on Sep 23, 2011

All the changes are symptomatic. The reality is that the International Banksters goal is to Bankrupt every Nation, introduce Globalisation, and a culling frenzie to destroy the middle classes make them destitute. That process has been under way for a long time. Presently we are at the cross roads of our own extermination because most of us still do not realise that we are being lied to big time, that all the UN, WHO, FDA recommendation are exactly the opposite to what is required to have a healthy and wealthy population. They know it,but is never gets mentioned in the papers . If it did there would be panic. People believe me, The Elite have us on death row, and few of us realise it. Waky , Waky!!!!!!!!!!

12:43PM PDT on Sep 23, 2011

So what's so good about a global economy?

11:53AM PDT on Sep 23, 2011

This does not appear as straightforward as it seems at first glance. The timing is great. Are we cynical enough to wonder if this is manufactured? I am. T How many insiders have their hands in some pot or another. Who is coming out of this making tons of money. Will there be answers?

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