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Dow Plunges Below 8000: Stocks, Bonds Greet Obama with Bronx Cheer
Posted Jan 20, 2009 01:49pm EST by Aaron Task in Investing, BankingUpdated from 1:49 p.m. ET
Update: The Dow Jones Industrial Average suffered its biggest Inauguration Day drop in its 112-year history Tuesday, falling 332 points or 4% to 7949, its lowest level since Nov. 20. Meanwhile, the S&P 500 lost 5.3%, and is now down 11% in the first 12 trading days of 2009; the Nasdaq shed 5.8%.
Earlier: Heading into this week, the hope on Wall Street was the market would rally on both the "feel good" tidings surrounding Obama's inauguration, and the fact the broad market held up relatively well last week despite ongoing carnage in the financials.
So far, no good on that theory as financial markets stumbled badly Tuesday amid, yes, ongoing carnage in the financials, which sent the Financial Select SPDR (XLF) down 16.5% to a new-52 week low. Update:
- State Street Corp., the largest money manager for institutions, tumbled 59% after unrealized bond losses almost doubled, as detailed by Bloomberg.
- Bank of America fell nearly 29% after Friedman, Billings, Ramsey's Paul Miller predicted the firm needs more than $80 billion in new capital to offset losses. Miller also said Wells Fargo may need to cut its dividend and the bank's shares fell 24%.
- Royal Bank of Scotland plummeted 69% after forecasting a loss of about $12 billion, prompting the U.K. government to take a bigger stake in the firm and a big step toward outright nationalization.
Earlier in the day, long-dated Treasury prices were tumbling relatively worse than stocks amid the growing realization that more bank bailouts - if not outright nationalizations - are going to lead to tremendous borrowing from governments worldwide, and an accompanying huge supply of fixed-income paper. But fears of bank nationalizations that totally wipe out existing bond and stockholders alike helped Treasury prices rebound from their worst levels of the session, especially short-dated securities; still, the 30-year bond lost nearly 2 points, a very big decline in bond-land that sent its yield up 85 basis points to 2.96%.
Once again, it's a hard day to find a silver lining for those long financial assets and many traders are now braced for an imminent retest of the Nov. 20 closing (and multiyear) lows of 7552 for the Dow and 752 for the S&P 500.
The stock market was sliding midday but the real damage was in Treasuries. Long-dated Treasury prices were tumbling amid the growing realization that more bank bailouts - if not outright nationalizations - are going to lead to tremendous borrowing from governments worldwide, and an accompanying huge supply of fixed-income paper.
117 Comments
georgeg - Tuesday January 20, 2009 01:59PM EST
At least when the Highway Patrol arrives at a head on collision, they know it is a CRASH.. This is worse than the Great Depression it just the river has not got all the way down stream. I saw a vid clip from NBC that show the people that are paying to be at the table with OBAMA... it does not suprise me that it was mostly rich bankers. PRAY FOR US... GOD WE NEED YOU NOW!
__A_YAHOO_USER__ - Tuesday January 20, 2009 02:02PM EST
Bush can not help us in this econonic trouble,even President Obama can not help us all unless we turn to God way......God way is correct.....Do not be greedy....Individual greeds make us all fall.... In others words we are greedy and materialistic.and most of all cruel..........Remove it and we will succeed.....
Yahoo! Finance User - Tuesday January 20, 2009 02:07PM EST
The whole American economy is a Bonzi scheme. America even has to borrow the money to pay interest on its $10 trillion dollar national debt. We are screwed - Obamas pretty speeches can't change or cheat reality.
Yahoo! Finance User - Tuesday January 20, 2009 02:11PM EST
Give every tax-paying American $25K. Best stimulus idea yet.
Yahoo! Finance User - Tuesday January 20, 2009 02:17PM EST
Trillions just to bail out the banks. Americas gross national product is only $13 trillion. America is history. And Obamas speeches are like watching Star Wars, something in a far far galaxy ie divorced from reality. No wonder the Dow is still coming down.
Yahoo! Finance User - Tuesday January 20, 2009 02:24PM EST
Is now a good time to get into the market?
Yahoo! Finance User - Tuesday January 20, 2009 02:24PM EST
Is now a good time to get into the market?
Warren - Tuesday January 20, 2009 02:27PM EST
I warned on this blog last Nov, the market speculate, cheering OBAMA 's winning election with 500 point rbound, carried Dow from 24 % gain for Santa holiday and January effect rally to 9050 were extremely overpriced, the market will give up all its gain and heading for 7000 reflecting the recession impact on housing, credit, banking, crisis. tH PLUNGING IN CONSUMER, BUSINESS DEMAND AND SOARING JOBLESS TO 7.2 %, will continue acclerating houng prices deep decline and drag business, consumer spending plung lower and soaring job cuts, drag economy into prolonged deep recession and deflation widening banking finance mortgage, credit market loss as indicated by Bank of America 16 billion loss and with 119 billion bad asset, Citigroup 8 billion loss and spreading into UK RBS 41 billion loss. Even JP Morgan bank will be fcing in the next quarter. All other sectors from aluminum, IT to auto, retial all facing earning decline and widening loss, and will continue through out tis year. This vicious cycle will drag Dow ones index easily to below 7000 and SP to 65, NASDAQ to 1200. details on www.osawh.com/fund2009.htm www.osawh.com/SP500.htm
BFD - Tuesday January 20, 2009 02:27PM EST
BWAHAHAHAHA! The politicians are gonna fix this mess! BWAHAHAHAHA! Please stop...all the laughing is killing me.
Harold - Tuesday January 20, 2009 02:27PM EST
NOTICE HOW WARREN BUFFET IS NO LONGER MAKING HEADLINES. HE WOULDN'T DARE COME BACK INTO VIEW BRAGGING ABOUT WHAT HE BOUGHT AT A BARGAIN PRICE. THINGS AREN'T SO ROSY ANYMORE FOR HIM ARE THEY? THE DEPRESSION CONTINUES.....
Yahoo! Finance User - Tuesday January 20, 2009 02:29PM EST
Time to get out of the me, myself and I frame of mind. Start saving your money instead of charging your way through life...after your long gone the ipod will still be working.
k j - Tuesday January 20, 2009 02:30PM EST
When the government stops looking to be our saviour and help us lead our lives their way, then the country can begin to return to its Christian values. No greed, no cheating, no sex on every show and every screen (movie, tv etc.).. What ever it takes for each of us to start this trend we need to do.. God Bless America..
__A_YAHOO_USER__ - Tuesday January 20, 2009 02:30PM EST
Johhny Ike,I felt thru my couch & found enuff change to buy a cheap bottle of whiskey.CHEERS!!!
Tim - Tuesday January 20, 2009 02:31PM EST
When you have the highest corporate tax rate around, and the new Prez keeps talking about govt spending and new regulations on businesses, what do you expect. Pretty speeches don't make a difference. Step up and make the right decisions for business and the market and economy will turn around.
JasonF - Tuesday January 20, 2009 02:33PM EST
I agree. Divide 1 trillion by 138 million US taxpayers. That's nearly 10K a piece. Let us decide how to spend it instead of politicians. We already know where politicized "economics" gets us. A bunch of pork for some and not for others.
cc - Tuesday January 20, 2009 02:35PM EST
I'm ashamed to see that despite so much abuse the American public has taken, despite so much sodomy of the general public by the governing elites, I have yet to see a decent Protest March. What happened to the protest spirit of the 70's? What happened to the radicals who marched for something bigger than their own self-interest? What happened to the student leaders? Too busy organizing frat parties? You americans should be ashamed - you've been turned fat, lazy and comfortable with easy and continued access to X-Box, Mcdonalds "jumbo" sized meals, and the all-achievable "American Dream" of hollywood stardom through dumb reality TV. You people have been lied to, abused, sodomised and here's the clincher - now you're expected to cleanup the diarrohea created as well as to wipe the backside of the people who did all that to you. And the only thing some of you can say is "Bush screwed up". What a pathetic bunch of lsoers you guys are. You pretty well deserve what you're getting. Too bad you have to drag the rest of the world with you as well. If you Americans have any "stones" left, the world will see a Protest march, a size of which has never beens seen before. Show the world that the ordinary joe will not be taken to the cleaners by some snob faced politicians or VIP money man who claim that they are doing you and the economy a favor by letting you wipe their asses. Let the fires of the vietnam protest be awakened.
cc - Tuesday January 20, 2009 02:36PM EST
I'm ashamed to see that despite so much abuse the American public has taken, despite so much sodomy of the general public by the governing elites, I have yet to see a decent Protest March. What happened to the protest spirit of the 70's? What happened to the radicals who marched for something bigger than their own self-interest? What happened to the student leaders? Too busy organizing frat parties? You americans should be ashamed - you've been turned fat, lazy and comfortable with easy and continued access to X-Box, Mcdonalds "jumbo" sized meals, and the all-achievable "American Dream" of hollywood stardom through dumb reality TV. You people have been lied to, abused, sodomised and here's the clincher - now you're expected to cleanup the diarrohea created as well as to wipe the backside of the people who did all that to you. And the only thing some of you can say is "Bush screwed up". What a pathetic bunch of lsoers you guys are. You pretty well deserve what you're getting. Too bad you have to drag the rest of the world with you as well. If you Americans have any "stones" left, the world will see a Protest march, a size of which has never beens seen before. Show the world that the ordinary joe will not be taken to the cleaners by some snob faced politicians or VIP money man who claim that they are doing you and the economy a favor by letting you wipe their asses. Let the fires of the vietnam protest be awakened.
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s - Tuesday January 20, 2009 01:56PM EST
boo hoo cry baby