Dow tumbles 7%
Dow falls below 8,600 for first time since 2003 - on the 1-year anniversary of its all-time high.
By Alexandra Twin, CNNMoney.com senior writer
October 9, 2008
NEW YORK (CNNMoney.com) -- Markets tanked Thursday - with the Dow falling nearly 700 points during the session - as panicked investors dumped stocks across the board.
Bank lending remained tight as nervous institutions continued to hoard cash. Treasury prices fell, raising their corresponding yields. The dollar gained versus the euro and the yen. Oil, gas and gold prices fell.
The Dow Jones industrial average lost 679 points, or 7.3%, closing at its lowest point since May 21, 2003. It was the Dow's third biggest one-day point-loss ever.
The Standard & Poor's 500 index lost 7.6% and closed at its lowest point since April 28, 2003. The Nasdaq composite lost 5.5% and closed at its lowest point since June 30, 2003.
A key measure of investor fear hit an all-time high: The CBOE Volatility index, or the VIX, hit nearly 64.
Over the last seven sessions, the Dow has lost 2,271 points, or 20.1%. Since hitting an all-time high of 14,164.53 one year ago today, the Dow has lost 39.4%.
"We are in a free fall right now and fundamentals have been thrown out the window," said Phil Orlando, chief equity market strategist at Federated Investors.
Stocks have tumbled despite a series of efforts on the part of the government to unfreeze the credit markets and get money flowing through the system again.
On Thursday, the Treasury said it was looking to buy stakes in some banks as part of the $700 billion bank bailout law enacted last week. The main focus of the bailout remains buying bad assets from banks.
The Fed and Treasury have done many things right, but the markets realize that these programs won't have an impact on the market until six to nine months out, Orlando said.
"[Third quarter] earnings will still be poor, [third-quarter] GDP will be a disaster," he said. "Investors are trying to price in the depth of the recession now."
One year ago today, the S&P 500 hit an all-time high of 1565.15. As of Thursday's close, it was down 41.9%.
The Nasdaq has never come close to its record of 5,048.62 hit on March 10, 2000, at the end of the tech bubble. But after hitting a six-year high of 2,859.12 last Halloween, the Nasdaq had slipped 42.5%, as of Thursday's close.
Stocks had slumped throughout the year, but the selling accelerated in September following a series of bank failures and mergers.
"The Lehman bankruptcy was really the failure that triggered this waterfall event we've been going through," said John Merrill, chief investment officer at Tanglewood Wealth Management.
"Suddenly people who thought they had access to money didn't have money and they had to sell something," he said. "So it started with forced selling and it's turned into a panic."
After the close of trade Thursday, Citigroup said it failed to reach a deal with Wachovia. Citi said that although it will seek damages, it won't block a Wachovia-Wells Fargo merger.
GE is due to report earnings Friday. In addition, President Bush is expected to make a statement in the morning, telling investors that economic officials are doing everything they can to stabilize our financial system.