Wall St. Slide Fuels Worries on Economy
By FLOYD NORRIS and JEREMY W. PETERS
Stock markets around the world plummeted yesterday in a wave of
selling set off by a plunge in China that was reinforced by worries
of weakening economies. The falling prices continued in early Asian
trading today, but by midday the Chinese market seemed to be
stabilizing.
While China was the first market to tumble, it was not clear what
set off the selling. But once it began, it spread first to other
Asian countries, then to Europe and the United States.
It was sort of one of those days where somebody snaps their
fingers, and the markets hypnotic trance is over, said Stuart
Hoffman, chief economist of PNC Financial.
In China, where the stock market had been soaring, the government
had warned banks about improper loans to finance stock
speculation.
In America, the selling seemed to add to worries that a decline in
the housing market, and problems in particular with loans to risky
borrowers, could spill over. And a report yesterday indicating that
orders for durable goods items like washing machines and
computers were surprisingly weak in January revived doubts about
the strength of the American economy.
Alan Greenspan, the former chairman of the Federal Reserve, in a
speech transmitted to a business conference in Hong Kong on Monday,
said that he could not rule out a recession in the United States
later this year. In so doing, he seemed to distance himself from
Ben S. Bernanke, the current Fed chairman, who has been much more
upbeat.
Noting that global markets have been strong for years, Mr. Hoffman
said: Weve had this What me worry? mentality. And this is a
little bit of a wake-up call.
The Dow Jones industrial average fell as much as 546 points
yesterday afternoon, before closing down 416.02 points, or 3.29
percent. In percentage terms, it was the worst day for the market
since March 2003. In terms of points, it was the steepest slide
since the first day the market resumed trading after the Sept. 11
terrorist attacks in 2001.
The Standard & Poors 500-stock index, the benchmark index for
many investors, slid 3.47 percent, and the technology-heavy Nasdaq
composite index fell 3.86 percent. All three major indexes erased
their gains for the year.
The sell-off left almost every major stock lower, including all 30
stocks in the Dow industrials and all but two in the S.& P. 500
and one in the Nasdaq 100. As the 4 p.m. closing bell finally rang
at the New York Stock Exchange, traders on the floor erupted with
hearty boos.
At the close, said Howard Silverblatt, an index analyst with
Standard & Poors, the S.& P. 500 had lost $452 billion in
market value, and other American stocks had shed an additional $180
billion.
After steady declines in all markets, panic seemed to hit the
American market just before 3 p.m., perhaps caused by sell programs
that went off at 2:52 p.m., when the S.& P. 500 fell to the
point where it was down 3 percent for the day. Within 10 minutes,
it had fallen to its low for the day, down 4.3 percent. It ended
with a loss of 3.5 percent.
