Article 43


Tuesday, February 27, 2007

Bad Moon Rising Part 10 - Glimpse Of Wall Street’s Next Crash

Dow Jones Drops 500 Points

By Ellis Mnyandu
February 27, 2007

Stocks sink on fears about CHINA and GROWTH

U.S. stocks tumbled on Tuesday, driving the Dow Jones industrial average down in its worst slide since the aftermath of the Sept. 11 attacks, as a sell-off in China’s stock market raised concerns that equity valuations may be too high.

A U.S. government report showing a bigger-than-expected drop in January’s new orders for U.S.-made durable goods added to investors’ concerns about the outlook for economic growth and corporate profits. Those worries added more fuel to the sell-off and helped contribute to a loss of about $600 billion in market value for the day.

The New York Stock Exchange’s closing bell was greeted with a chorus of “boos” from the trading floor. A surge in trading volume triggered a technical glitch in late afternoon, contributing to an abrupt swing in the Dow average, which briefly fell 500 points. A Dow Jones Indexes spokeswoman said the glitch did not affect stock prices.

Investors dumped stocks with the biggest exposure to Chinese demand, including Caterpillar Inc., whose shares slid 3.6 percent, while Tuesday’s sell-off wiped out the year’s gains for all three major U.S. stock indexes.

“There seems to be just an air of nothing is safe anymore, there’s nowhere to go and people are rotating into bonds as a safe haven,” said Andre Bakhos, president of Princeton Financial Group in Princeton, New Jersey.

The Dow Jones industrial average slid 416.02 points, or 3.29 percent, to end at 12,216.24. The Standard & Poor’s 500 Index dropped 50.33 points, or 3.47 percent, to finish at 1,399.04. The Nasdaq Composite Index sank 96.65 points, or 3.86 percent, to close at 2,407.87.


At one point, the Dow fell as much as 546.20 points, or 4.32 percent, to a session low at 12,086.06. It was its biggest one-day point decline since after the Sept. 11, 2001, attacks. Both the Dow and the S&P 500 had their worst one-day percentage drop in almost four years, while the Nasdaq had its worst day since December 2002.

For the year to date, the Dow was down about 2 percent, while the S&P 500 was down about 1.36 percent and the Nasdaq was down about 0.31 percent.

The yield on the benchmark 10-year U.S. Treasury note dropped to 4.50 percent, the lowest since late December, as investors bought bonds in a flight to quality. The 10-year note’s price, which moves in the opposite direction of its yield, rose more than a full point, or 1-1/32, to 101.


On Tuesday, the die for the trading day was cast when China’s Shanghai Composite Index dropped almost 9 percent on fears that the government would crack down on speculation that has driven stock prices there to record highs.

Before Wall Street’s opening bell, there was more bad news. A government report showed a much bigger-than-expected drop of 7.8 percent in January’s new orders for U.S.-made durable goods, which added to concerns about a slowdown in economic growth.  Durable goods are big-ticket items, including home appliances and computers, intended to last three years or more.

“Durable goods are a key forward-looking indicator of business activity, so the broad-based drop that we saw today means that confidence in the economy is weaker across a number of sectors and the chance of an investment-led recession is quite a bit higher,” said Andrew Bernard, professor of International Economics at the Tuck School of Business in Dartmouth, New Hampshire.


In one sign of how shaken investors were, the CBOE Volatility Index, known as Wall Street’s “fear gauge,” surged 70.5 percent to a session high at 19.01 and then retraced its steps a bit to end at 18.31, a gain of 64.2 percent.

Howard Silverblatt, senior index analyst at Standard & Poor’s, said the stock market’s tumble wiped out more than $430 billion in the S&P 500 stock values, almost matching the value of stock buybacks by S&P 500 companies last year.

He estimated that for the overall market, the loss was $600 billion.

All 30 stocks in the blue-chip Dow average finished in the red as investors unloaded shares of companies with big exposure to the Chinese economy.

During the session, all three major U.S. stock indexes broke below their 60-day moving averages—a sign that the momentum that has carried U.S. stocks through a record run higher from July has begun to stall.

Exxon Mobil Corp. was the biggest decliner in both the Dow and the S&P 500, with its stock falling 4.7 percent, or $3.57, to $71.83 on the New York Stock Exchange.

Caterpillar Inc., the U.S. heavy equipment maker that does extensive business in China, dropped 3.6 percent, or $2.43, to $64.83, also on the NYSE.

The Philadelphia Stock Exchange’s semiconductor index ended down 3.1 percent, its second-sharpest one-day slide this year.

Shares of technology bellwether Cisco Systems Inc. skidded 5.6 percent, or $1.53, to $25.71. The stock was among the biggest losers in both the Nasdaq 100 <.NDX> and the S&P 500.

A rare bright spot on the Big Board was RadioShack Corp., up 11.9 percent, or $2.68, at $25.13. The stock was the NYSE’s No. 1 percentage gainer after reporting higher quarterly profit, due to cutting costs and closing unprofitable stores.

Volume was heavy on the NYSE, where about 2.41 billion shares changed hands, well above last year’s estimated daily average of 1.84 billion. On the Nasdaq, about 3.02 billion shares traded, sharply exceeding last year’s daily average of 2.02 billion.

On the Nasdaq, the number of advancing issues totaled just 281 stocks—the smallest number in about 10 years. In contrast, a total of 2,832 stocks fell on the Nasdaq—with the decliners outnumbering the advancers by a ratio of slightly more than 10 to 1.

On the NYSE, more than six stocks fell for every one that rose. A total of 2,949 NYSE stocks declined, while only 451 shares rose and 104 issues were unchanged. (Additional reporting by Caroline Valetkevitch, Emily Chasan and Bill Rigby)


Bad Moon Rising
Part 1 - Part 2 - Part 3 - Part 4 - Part 5
Part 6 - Part 7 - Part 8 - Part 9 - Part 10
Part 11 - Part 12 - Part 13 - Part 14 - Part 15
Part 16 - Part 17 - Part 18 - Part 19 - Part 20
Part 21 - Part 22 - Part 23 - Part 24 - Part 25
Part 26 - Part 27 - Part 28 - Part 29 - Part 30
Part 31 - Part 32 - Part 33 - Part 34 - Part 35
Part 36 - Part 37 - Part 38 - Part 39 - Part 40
Part 41 - Part 42 - Part 43 - Part 44 - Part 45
Part 46 - Part 47 - Part 48 - Part 49 - Part 50
Part 51 - Part 52 - Part 53 - Part 54

Posted by Elvis on 02/27/07 •
Section Bad Moon Rising • Section News
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