The U.S. stock market is posting sharp losses for the eighth
consecutive session as global economic fears sink markets worldwide.
Volatility has been extreme and volume has been heavy. The S&P 500 opened with a 7.7% loss, quickly rebounded to a gain of 1.0%, and then sank to its current loss of nearly 6%.
Global stock markets saw some of their worst sessions in decades. In Asian trading, Japan's Nikkei fell 9.6%, China's CSI fell 4.4% and Hong Kong's Hang Seng dropped 9.6%. In Europe, London's FTSE fell 8.5%, Germany's DAX dropped 8.1% and France's CAC declined 7.7%.
Credit markets remain tight and uncertainty is high. The TED spread,
which is the difference between what banks charge each other for
three-month dollar loans (three-month Libor) and what the government
pays (three-month T-Bill) is up 29 basis points to 4.52%. For
comparison, the TED spread averaged 0.36% in 2006. Dollar Libor climbed across eight of the 15 terms, although the overnight rate did ease to 2.47% from 5.09%.
In corporate news, Morgan Stanley (MS 7.67, -4.78) and Goldman Sachs
(GS 76.57, -24.78) are getting hit especially hard after both of their
long-term credit ratings were put on review for a downgrade at Moody's.
Initial results show that Lehman Brothers bonds were priced at 9.75
cents on the dollar during an auction by credit default swap (CDS)
sellers, according to Creditfixings.com, an executor of credit
derivatives. This means that firms that sold Lehman credit default
swaps, which investors buy to protect against the default of a company,
will have to pay 90.25 cents on the dollar to the CDS holders --
resulting in steep losses for the CDS sellers.
In earnings news, General Electric (GE 18.84, -0.17) posted a
10% year-over-year drop in third quarter earnings per share to $0.45,
which met estimates. The company also said it is on track to meet its
full year guidance and will maintain its dividend for the full year.
Commodity prices (-4.2%) are plunging in conjunction with
stocks, as traders speculate a slowing global economy will impact
demand. Oil prices are down 7.7% to $80.00 per barrel.
All ten of the economic sectors are posting a loss, ranging from 3.0% to 11.5%. Energy stocks (-11.5%) are down the most due to the weakness in oil prices. The financial sector (-3.0%) is posting the smallest loss.
For the week, the S&P 500 is down 22.2% -- its largest weekly
percent loss ever. The index has fallen 46% from its October 2007
all-time high.