Transcripts

The Dow Takes Another Drastic Dive

SUSIE GHARIB: A dramatic sell off on Wall Street today. The Dow plunged 360 points, closing at 13,300. The blue chip average has now fallen 864 points from its record high set on October 9. The NASDAQ tumbled 76 points. Investors dumped stocks after General Motors reported a huge quarterly loss, the U.S. dollar hit a new low and gold and oil rose to new highs. Scott Gurvey has more on what's rattling the markets.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Every analyst today seemed to have at least a half a dozen explanations for the broad sell off. Start with the ever-weakening U.S. dollar, which fell overnight following reports China might want to diversify its dollar-denominated holdings. Factor in the credit crunch and the exposure of financial institutions and then add crude oil prices nearing $100 a barrel, although oil prices retreated a little at mid-morning following the weekly inventory report. What you got was a flight to quality where only gold and other precious metals seemed acceptable. December gold set a record for a front month contract at $833.50 an ounce. Commodities analyst George Gero of RBC Capital says investors are playing defense.

GEORGE GERO, COMMODITIES ANALYST, RBC CAPITAL MARKETS: The driver is the U.S. dollar, the interest rate and the problems in the credit markets where people want alternative investments. And so they turn to gold, whether they buy an ETF or they buy a future's contract, they do asset allocate by making sure that their purchasing power doesn't diminish.

GURVEY: The impact of the mortgage crisis was also felt at General Motors, where losses at its financial unit added to a big tax-related charge giving GM its largest quarterly net loss ever, $38.6 billion. GM's CFO Fritz Henderson says 2008 will also be a tough year.

FRITZ HENDERSON, CFO, GENERAL MOTORS: The market is actually running below what we typically run at in the United States and that in and of itself is a challenge. I would say that the challenge is in the market today. We're not at least forecasting a significant worsening of primary demand, but we're also not for in the short term a rebound.

GURVEY: Market volatility will continue, says David Katz of Matrix Asset Advisor, until some of the uncertainties are resolved.

DAVID KATZ, CHIEF INVESTMENT OFFICER, MATRIX ASSET ADVISOR: You're going to have to see some sort of the market settling down in terms of its fear about sub-prime and its issues related to the financial sector. When that settles down, we think the market is going to look beyond a lot of what's going on with the currency and also with higher oil prices.

GURVEY: Several Federal Reserve officials made market soothing comments today. Tomorrow we'll hear from Fed Chairman Ben Bernanke, who testifies before the Joint Economic Committee of Congress. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.