IBJNews

Fear about world economy sends markets lower

Back to TopCommentsE-mailPrintBookmark and Share

Stocks opened sharply lower Thursday, extending a rout around the world. Indicators across the financial markets suggested investors were frightened that the global economy is in for a long slump.

The Dow Jones industrial average fell 300 points within minutes of the opening bell Thursday morning. It fell 283 points on Wednesday after a tacit acknowledgment from the Federal Reserve that the U.S. economy won't improve anytime soon.

At 11:05 a.m., the Dow was down 347 points, or 3 percent, at 10,777. The Standard & Poor's 500 was down 33, or 3 percent, at 1,133. The NASDAQ composite was down 65, or 2.6 percent, at 2,473.

The price of commodities like oil and metals dropped steeply because investors worried that demand for them would fall if the world economy keeps slowing or falls into recession again.

Looking for a safe place to put their money, traders bought American government debt, which they see as much less risky than stocks. The yield on the 10-year Treasury note hit a record low, 1.77 percent, down from 1.86 late Wednesday. Yields fall as investors buy bonds and send their prices higher.

The Fed, adopting a new strategy to try to get the U.S. economy going, announced Wednesday that it would shuffle $400 billion of its own holdings in hopes of reducing interest rates on long-term loans.

The central bank hopes that allowing people and businesses to borrow money more cheaply will encourage them to spend it throughout the economy, providing a lift that could turn it around.

The Fed statement troubled investors. It offered a bleak assessment of the future of the U.S. economy, saying it sees "significant downside risks to the economic outlook," including volatility in overseas markets.

"What we're seeing is the ebbs and flows around a big risk that everyone's having difficulty dealing with," said Barry Knapp, head of U.S. equity strategy for Barclays Capital. "We're just going to be dealing with these waves for some time to come."

Asian stocks were hammered to start the world's trading Thursday. The Nikkei index in Japan fell 2.1 percent. The main stock averages fell 2.9 percent in South Korea, 2.6 percent in Australia and almost 5 percent in Hong Kong.

Europe fared even worse. The stock market fell 5.4 percent in France, 4.6 percent in Germany and almost 5 percent in Britain. Besides the economic headache, Europe is wrestling with how to tame a big debt problem.

In New York, stocks fell sharply even though the New York Stock Exchange executed a rule designed to smooth trading.

The exchange invoked Rule 48, which limits how much information is released about stock trades. It is only used on days when extreme volatility is expected in the stock market.

Computer systems that are programmed to analyze charts, capitalize on tiny changes in price and execute trades with no human intervention have made the swings in the market bigger this summer.

High-frequency trading programs make up about half of the trading volume in a normal market day but 70 percent or more on a volatile one.

The price of oil fell 6 percent, more than $5 a barrel, to $80.76, its lowest since Aug. 19. The selling reflected concerns that world demand for oil would fall if the economy slows.

And the price of gold fell more than 4 percent. Earlier this summer, gold set one record high after another. Investors wanted it both as a safe place for their money and to cash in on what seemed an unstoppable run.

The government reported Thursday that fewer Americans filed new claims for unemployment benefits last week. But the decline wasn't nearly enough to raise any real hope that the job market is getting better.

FedEx stock fell 9 percent after it said that it would earn less in 2012 than it had expected. The company is seen as an indicator because demand for shipping rises and falls with the economy.

The next big round of corporate earnings reports doesn't start for several weeks, but many analysts expect big companies can't sustain the strong profits they have posted for the last few quarters.

The S&P 500, a broad measure of the stock market, is still above its lowest point from August — 1,119 on Aug. 8. Major swings in the market were common last month as investors focused on fear of a new recession.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. Good Day I am Mr (Victoria Wright) from United state of America, i stayed in NEW YORK, and i have a broke up business, until i found this company email who help me to gain a loan for business,, and now i want to used this short medium to congratulate the below company for the fast and safe money they loan to me without any form of collateral, i loan 500,000USD from the company to save my business and lots more, i saw their mail on the internet, everyone always give testimony for what they did, so i quickly contacted them and they all did everything for me without stress and my money was sent to my account just 3 days later, i was surprise and i feel so glad, now i have a standard business control agent who help me, now i will advice those who need urgent loan to contact him at the bellow email:zenithfirm12@gmail.com

  2. NOTICE:This is to inform the general public that Vampires are real. My name is James Franklyn.,am an agent of vampire,am here to introduce our new world trend to you,a world of vampire where life get easier,we have made so many persons vampires and have turned them rich,you will be assured long life and prosperity,you shall be made to be very sensitive to mental alertness,stronger and also very fast,you will not be restricted to walking at night only even at the very middle of broad day light you will be made to walk.In case you are wildly oppressed by some unscrupulous persons we can still help you fight them.Your protection is assured immediately you join.Just contact the bellow email if you are interested we are here to attend to you anytime you want us. Contact the bellow email for more details. Email:vampirescreed@hotmail.com Sincerely: James Franklyn.

  3. Bravo! Someone else that is willing to speak the truth! Bravo!_____NBCSN is available in almost 2 MILLION more homes than just a few years ago, but Indycar STILL gets less total viewers than it did just a few years ago when NBC took over Versus. Attendance and ratings cratered with the end of season races (just when the title battle got "interesting" HAH!__________And now...new race in Basilia, where Miles celebrated the "rich history" of Indycar racing there. Rich history? What, 7 events in the 100 years of AOW? Yep, some history. Well, at least its an oval. It's not??? Are you kidding me??? Gosh darn road racin furriners.

  4. PURITY RAY LOAN OFFER........ Have you been denied by your banks,or are you in need of of an urgent loan to pay of your bills we are capable of giving loans @ cheaper rate to interested individuals, student, companies and members of the public in need of finance to settle bills, we do offer considerable loans which you can count on. For more information on our various types of loan,then you will have to contact PURITY RAY LOAN FIRM, to help you achieve your desire LOAN APPLICATION FORM TO BE FILLED BORROWERS INFORMATION * Full name:………………………. * SEX * ……………………………. * Country………………………….. * State:……………………………. * Land:…………………………….. * Occupation:…………………….. * phone number:…………………. * Telephone: ………………………….. * Age:………………………………. * Amount needed as loan:……… * Loan Duration:………………….. * Propose of Loan:……………….. * Annual revenue:………………… * Monthly Income:……………….. * Guarantee:………………………. * Payment: monthly or annually Email.....purityrayloanfirm@gmail.com Thank you and God bless Mr Purity Ray PURITY RAY LOAN FIRM we tend to serve you better

  5. Problem: most of the people responding to this article don't know about this service AT ALL! Why? Lack of awareness. This isn't IndyGo. This is CIRTA: might as well be the mattress company because they are asleep at the wheel - something like 3 directors over the last year? Playing with federal grant money is great! This "region" wants commuter rail service, has spent MILLIONS on Transportation studies yet can't even support a commuter bus line? This is largely for suburban riders to get to downtown - not for "service people to work in our hotels and restaurants" ! Get your head out of your backside!! These are professionals, students etc. that don't want to fight traffic, save some money on parking, gas, stress.... if CIRTA would put their federal money into widely promoting the sevive to Greenwood, Fishers & Carmel instead of finding directors and studies - this would be a successful service. Our family uses(d) it daily for the last several years - but the recent uncertainty & now unreliability due to cuts from Carmel has been a problem. Now, costs us an additional $350/month for gas & parking ( $4200/year) plus vehicle wear, service, environmental impact ... YES - this REGION needs this this type of service in order to keep growing and getting the people it needs to fill skilled positions in downtown Indianapolis. Think outside of your own car !!!

ADVERTISEMENT