The curtain closed on yet another disappointing day on Wall Street, and even a historic effort by central banks around the globe to cut interest rates could not halt the wave of selling slamming stocks this week.
The markets extended one of their longest losing streaks in recent memory as Wall Street worries the latest emergency action from the Federal Reserve won't be enough to stave off a global recession.
Today's Market
The Dow Jones Industrial Average slid 189.01 points, or 2.00%, to 9258.10. The broader S&P 500 Index lost 11.29 points, or 1.13%, to 984.94 while the Nasdaq Composite dropped 14.55 points, or 0.83%. to 1740.33. The consumer-friendly FOX 50 fell 10.84 points, or 1.44%, to 739.70.
It would be an understatement to say Wednesday's trading session was turbulent. Wall Street had a schizophrenic reaction to the global rate cuts as markets swung wildly between sharp rallies and even sharper selloffs, ultimately ending on the downside.
The Dow has plummeted more than 1600 points over the past week, leading some to wonder when the selling will cease. The S&P 500's five-day percentage losses coming into Wednesday were the steepest since the crash of 1987.
“It’s become a panic…But that tends to be [part of] the process of making a bottom,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
Aluminum maker Alcoa (AA) led the way down on the Dow Wednesday, plunging as much as 20% on its weaker-than-expected quarterly results. GeneralMotors (GM) and Bank of America (BAC) didn't fare much better. On the other hand, Intel (INTC) and General Electric (GE) closed more than 1% higher to lead the index's percentage gainers.
The Nasdaq Composite managed more modest losses than the broader market, with BlackBerry maker Research in Motion (RIMM) and eBay (EBAY) rebounding solidly.
All eyes were on the Fed move as the markets largely ignored a better-than-expected report on pending home sales and a bearish oil inventory report.
Historic Central Bank Coordination
In an unprecedented move to save the U.S. from its worst financial crisis since the Great Depression, the Federal Reserve and fellow central banks lowered interest rates Wednesday morning.
The Fed voted unanimously in favor of cutting the nation's primary interest rate by 0.5% to 1.50%, reversing its summer-long strategy of holding rates steady on fears of inflation.The central banks said the intra-meeting move was needed because of "the recent intensification of the financial crisis."
That "intensification" has included the demise of storied Wall Street investment banks, some of the worst banking failures in U.S. history and credit markets that have all but frozen.
In addition to the Bank of England and the European Central Bank, the Federal Reserve was joined in the rate cut reduction by China, Canada, Sweden and Switzerland.
Markets initially rallied on the news but then turned sharply negative, in part on the realization the rate cuts won't turn the economy around overnight.
“Even though the rate cut had a euphoric effect, we still have to deal with so much more. There isn’t a set in stone solution. It’s a work in progress," said Stephen Carl, head trader at Williams Capital.
The early declines led some to hope for a capitulation moment that never came.
“Maybe this is the purge… Let's get it over with," said Frank Davis, director of sales and trading at LEKSecurities. “We’ve got fear selling going on. It's hard to control logic when you have fear selling.”
Meanwhile, British financial leaders sought to stop the credit crisis slamming its markets by unveiling an $88 billion rescue plan on Wednesday. In exchange for a capital injection, the U.K. government will take stakes in the banks that use the rescue package.
European markets initially soared on the coordinated interest rate action but then closed deeply in the red. London's FTSE 100 was closed down 238.53 points, or 5.18%, to 4366.69.
Asian markets performed even worse as the Nikkei 225 plunged 9.38% in its worst one-day plunge since 1987. The selloff came ahead of the coordinated interest rate cut.
Meanwhile, Indonesia's stock market dove 10% and Russia plummeted 15% before trading was halted on each exchange.
Markets Shrug off Major Reports
Retailers managed to exceed Wall Street's low same-store sales expectations in September but continued to show weakness.
Overall, same-store sales rose 1.5%, topping expectations from ThomsonReuters data for a 1.4% increase.
Discount retailers like Wal-Mart (WMT) and Costco (COST) posted sales increases in September, while clothing stores like Pacific Sunwear (PSUN)continued to show weakness.
Wal-Mart, the world's largest retailer, missed estimates with a 2.4% increase in same-store sales.
The markets paid little attention to a report from the National Association of Realtors that showed sales of previously owned homes jumped 7.4% in August to a reading of 93.4 -- the highest level since June 2007.
Meanwhile, crude oil futures fell to as low as $86 a barrel after the government reported huge gains in oil supplies. Crude closed down 28 cents to $88.43 a barrel.
The Energy Department said crude stockpiles jumped 8.1 million barrels last week while gasoline inventories added 7.1 million barrels. Both figures widely exceeded expectations from energy analysts polled by Platts.
Corporate Movers
Alcoa (AA) plummeted double-digit percentages a day after the aluminum maker reported a 52% dive in quarterly profit. Slammed by lower aluminum prices, Alcoa also announced plans to halt its stock buyback plan and all non-critical capital projects.
Citigroup (C) is seeking allies in its fight against Wells Fargo (WFC) to acquire the majority of Wachovia’s (WB) $448 billion in deposits, The Wall Street Journal reported.The three banks agreed to extend their litigation standstill until Friday morning.
MetLife (MET) lost one-quarter of its market value after the largest U.S. life insurer released plans to slash jobs and raise $2.76 billion in a common stock offering.
Bank of America’s (BAC) extended its slump as shareholders punish the company for its weaker-than-expected third-quarter earnings and $10 billion common stock offering. BofA’s sale of 455 million shares received a lukewarm greeting as it was priced at a steep discount. Also, BofA agreed in principle on Wednesday to buy back up to $4.7 billion of auction-rate securities from 5,500 customers.
Monsanto (MON) saw its shares rise sharply after the world’ largest seed maker reported better-than-expected quarterly results. The company posted an adjusted-loss of 3 cents per share in its fiscal fourth quarter, exceeding estimates for a loss of 9 cents. Monsanto’s revenue jumped 35% to $2.05 billion.
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