Wall St. Slide Fuels Worries on Economy
By FLOYD NORRIS and JEREMY W. PETERS
Stock markets around the world plummeted yesterday in a wave of selling set off by a plunge in China that was reinforced by worries of weakening economies. The falling prices continued in early Asian trading today, but by midday the Chinese market seemed to be stabilizing.
While China was the first market to tumble, it was not clear what set off the selling. But once it began, it spread first to other Asian countries, then to Europe and the United States.
“It was sort of one of those days where somebody snaps their fingers, and the market’s hypnotic trance is over,” said Stuart Hoffman, chief economist of PNC Financial.
In China, where the stock market had been soaring, the government had warned banks about improper loans to finance stock speculation.
In America, the selling seemed to add to worries that a decline in the housing market, and problems in particular with loans to risky borrowers, could spill over. And a report yesterday indicating that orders for durable goods — items like washing machines and computers — were surprisingly weak in January revived doubts about the strength of the American economy.
Alan Greenspan, the former chairman of the Federal Reserve, in a speech transmitted to a business conference in Hong Kong on Monday, said that he could not rule out a recession in the United States later this year. In so doing, he seemed to distance himself from Ben S. Bernanke, the current Fed chairman, who has been much more upbeat.
Noting that global markets have been strong for years, Mr. Hoffman said: “We’ve had this ‘What me worry?’ mentality. And this is a little bit of a wake-up call.”
The Dow Jones industrial average fell as much as 546 points yesterday afternoon, before closing down 416.02 points, or 3.29 percent. In percentage terms, it was the worst day for the market since March 2003. In terms of points, it was the steepest slide since the first day the market resumed trading after the Sept. 11 terrorist attacks in 2001.
The Standard & PoorÂ’s 500-stock index, the benchmark index for many investors, slid 3.47 percent, and the technology-heavy Nasdaq composite index fell 3.86 percent. All three major indexes erased their gains for the year.
The sell-off left almost every major stock lower, including all 30 stocks in the Dow industrials and all but two in the S.& P. 500 and one in the Nasdaq 100. As the 4 p.m. closing bell finally rang at the New York Stock Exchange, traders on the floor erupted with hearty boos.
At the close, said Howard Silverblatt, an index analyst with Standard & PoorÂ’s, the S.& P. 500 had lost $452 billion in market value, and other American stocks had shed an additional $180 billion.
After steady declines in all markets, panic seemed to hit the American market just before 3 p.m., perhaps caused by sell programs that went off at 2:52 p.m., when the S.& P. 500 fell to the point where it was down 3 percent for the day. Within 10 minutes, it had fallen to its low for the day, down 4.3 percent. It ended with a loss of 3.5 percent.
