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Business

Weak earnings stoke sell-off

A Korean Air Lines Cargo Boeing 747 takes off from Ted Stevens Anchorage International Airport in Anchorage, Alaska, in this August file photo. Boeing Co., the world's No. 2 commercial airplane maker, said Wednesday its third-quarter earnings plummeted 38 percent as a strike halted production of commercial jets.

A Korean Air Lines Cargo Boeing 747 takes off from Ted Stevens Anchorage International Airport in Anchorage, Alaska, in this August file photo. Boeing Co., the world's No. 2 commercial airplane maker, said Wednesday its third-quarter earnings plummeted 38 percent as a strike halted production of commercial jets.

October 23, 2008

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— Now what?

After three days of relative calm, turbulence returned to Wall Street on Wednesday. Louder warnings of a deep recession and weak corporate earnings took the Dow Jones industrial average down 514 points amid fears that government intervention won't be enough to prevent global economies from faltering.

Previous dramatic drops - two of them more than 700 points - were followed by rebounds. If that doesn't happen this time, the Dow could slip closer to closing below the 8,000 mark, which hasn't happened since March 31, 2003.

Wednesday's sell-off came after poor earnings from large companies in disparate sectors - Wachovia Corp., Boeing and Merck & Co. - illustrated how wide the downturn has spread. One bright spot was McDonald's Corp., where third-quarter profits rose thanks to the strength of its low-priced meals.

Even with the aggressive steps the government has already taken, Treasury Secretary Henry Paulson told interviewer Charlie Rose on Tuesday that Americans would "have a number of difficult months ahead of us in terms of the real economy."

Since stocks began tumbling on Sept. 15, the Dow has plunged as low as 8,451.19, its close on Oct. 10. On Wednesday, it closed at 8,519.21.

Big rallies last Monday and Thursday were enough to send all the major indexes higher, giving Wall Street its best week since 2003. The Dow gained 4.75 percent for the week - a gain that was erased in Wednesday's trading alone.

This week, the Dow had climbed 413 points Monday, then dropped 231 points Tuesday.

On Wednesday, most major indexes fell 5 percent or more, with the Standard & Poor's 500 down 6 percent. Oil prices hit lows last seen in June 2007, trading below $67 a barrel on worries about weakening demand.

Stocks dropped across Asia and Europe, falling even harder in South America, where Brazil's Bovespa index and Argentina's Merval had losses near 10 percent. Argentina's president announced plans to nationalize private pension funds to protect retirees from the financial crisis.

Mutual funds, pension funds and individual investors lost $700 billion in Wednesday's trading. It was the fifth time since Sept. 29 that the broadest measure of U.S. stocks, the Dow Jones Wilshire 5,000, had lost more than 5 percent in a day. During the prior 25 years, it had only eight days that bad.

For the week, the Dow is up 3.76 percent, the Standard & Poor's 500 index is up 4.65 percent and the Nasdaq composite is down 5.58 percent.

World leaders will gather in Washington on Nov. 15 to discuss the meltdown. A senior administration official said Wednesday that the forum will be the first in a series of international meetings to discuss what economists predict could be a long and deep downturn.

For many U.S. companies, the damage has already begun.

Wachovia, which is being bought by Wells Fargo for about $14 billion in stock, said it lost $23.89 billion in the third quarter, down from earnings of $1.62 billion a year ago. Boeing reported its earnings slumped 38 percent as a strike halted production of commercial jets.

Merck & Co. said it will slash 7,200 jobs as part of a new restructuring program. The drugmaker's third-quarter profit plunged 28 percent, partly because of flat sales. Earnings also fell at paper company Kimberly-Clark Corp., insurer WellPoint Inc. and drug developer Wyeth.

Comments

Daytrader23 6 years, 7 months ago

I thought it was because Obama was endorsed by Collin Powell.

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