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Wall Street tumbles big, Americans worry about credit
(Agencies)
Updated: 2008-10-08 08:50

NEW YORK - The misery worsened on Wall Street Tuesday, with stocks piling on losses late in the session and bringing the two-day decline in the Dow Jones industrials to more than 875 points amid escalating worries about credit markets and the financial sector.

The Dow lost more than 500 points and all the major indexes slid more than 5 percent. The Standard & Poor's 500 index saw its first close below 1,000 in five years.


Traders Matthew Jones, center, and Paul Svachula, left, watch the markets in the S&P 500 futures trading pit at the CME Group in Chicago, Tuesday, Oct. 7, 2008. [Agencies]

Steps by the Federal Reserve to reinvigorate the dormant credit markets ultimately weren't enough to calm nervous investors. News about financial companies only added to their despondent mood.

"The calls I'm getting — every money manager I deal with, and every client I talk to — are just very emotional. This is a very, very emotional time, and most of them are taking steps to shore up their defenses, reducing exposure to stocks just to defend their portfolios," said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors.



A board at the New York Stock Exchange shows the closing number for the Dow Jones Industrial Average, Tuesday Oct. 7, 2008. [Agencies] 

The magnitude of the stock market's plunge is reflected in the Dow's grim stats:

• Tuesday's close was its lowest close in five years, since Sept. 30, 2003.

• In just five trading days this month, and in the fourth quarter, it is down about 1,400 points, or 13 percent.

• It has fallen 33.3 percent since its record close of 14,164.53, a year ago Thursday.

• Through Tuesday, it suffered its largest five-day point decline ever, and its largest five-day percentage drop since the Sept. 11, 2001, terror attacks.

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The Dow's percentage loss Tuesday was 5.11 percent, actually a better performance than the 5.74 percent suffered by the S&P, the market indicator most watched by traders and analysts. The Nasdaq composite dropped 5.8 percent.

The market's paper loss for the session came to about $700 billion, as measured by the Dow Jones Wilshire 5000 Composite Index, which tracks 5,000 US-based companies' stocks. So far this month, the loss has come to about $2.2 trillion.

Federal Reserve Chairman Ben Bernanke warned in a speech Tuesday that the financial crisis could prolong the difficulty the economy is facing. While his remarks were widely regarded as a sign that an interest rate cut could be in the offing, Wall Street appeared little comforted and focused on his downbeat assessment.

Earlier, the Fed announced plans to buy massive amounts of corporate debt to jump-start lending in the markets where many companies turn for short-term loans called commercial paper. The evaporation of faith that loans will be repaid has lenders weary and is making it more difficult and expensive for businesses and consumers to borrow.

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