Stocks plunge at home and abroad on recession fears
Wall Street joined stock markets around the world in a huge sell-off Friday, sending major market indexes to their lowest levels in more than five years on the belief that a punishing economic recession is at hand.
A grim outlook from electronics maker Sony helped trigger the selling, and another bleak forecast from automaker Daimler added momentum to the drop.
The Dow Jones industrials fell more than 500 points soon after the opening bell. The blue chips then recovered some ground only to fall sharply again, ending the day with a loss of 312 points. All the major indexes fell more than 3%.
The pullback on Wall Street, while steep, wasn’t as bad as some observers had feared after stocks plunged overseas in response to another round of grim corporate news.
Sony’s profit warning sent its shares tumbling in Japan and offered only the latest example that companies are girding for a slowing economy and a pullback among consumers worried about falling home prices and losses on their investments.
In Germany, Daimler’s stock fell sharply after the company reported lower third-quarter earnings and abandoned its 2008 profit and revenue forecast.
Many investors have concluded that the world economy is headed for a severe downturn even as governments have raced to revive credit markets on the hope that a return of more normal lending levels by banks and other financial houses will fan economic activity.
“People have been saying that we’re in a recession. This is the realization,” said Scott Fullman, investment strategist at WJB Capital Group in New York.
Investors were nervous going into the session after U.S. stock futures -- the bets traders place on where the Dow will go -- fell so sharply before Friday’s opening bell that trading in the instruments was halted.
During the regular session, the Dow fell 312.30 points, or 3.6%, to 8,378.95.
Some investors took comfort in the fact that the blue chips remained above their Oct. 10 low of 7,882.51.
Broader stock indicators also fell Friday. The S&P; 500 index declined 31.34 points, or 3.5%, to 876.77, and the Nasdaq composite index dropped 51.88 points, or 3.2%, to 1,552.03.
Friday’s finishes for the Dow and the S&P; 500 were the lowest since April 2003. It was the Nasdaq’s lowest close since May 2003.
The Russell 2,000 index of smaller companies fell 18.80 points, or 3.8%, on Friday to close at 471.12.
Declining issues outpaced advancers by about 5 to 1 on the New York Stock Exchange.
For the week, the Dow fell 5.35%, the S&P; 500 lost 6.8% and the Nasdaq sank 9.3%.
The major stock indexes are down more than 40% from their record closes set last year: 41% for the Dow, 44% for the S&P; 500 and 46% for the Nasdaq.
Paper losses this week in the U.S. stock market hit about $800 billion, based on the Dow Jones Wilshire 5,000 index, representing nearly all stocks traded in the U.S.
