How Low Will Stocks Go? Wall Street Suffers Another Tumble
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JUDY WOODRUFF: The rout on Wall Street was back on today. The Dow Jones Industrial Average dropped more than 500 points, just a day after gaining more than 400.
On the trading floor today, it was mostly a question of how low stocks would go, after Tuesday’s big rally. Some analysts said the back-to- bearish outlook should have been expected.
JASON WEISBERG, Seaport Securities Corporation: The market doesn’t seem that schizophrenic from a trader’s standpoint, in that the trend is definitely down. We only had one day. And when you have nine or eight sessions of straight down, you are going to get like a dead-cat bounce, so to speak.
JUDY WOODRUFF: The Tuesday bounce followed the Federal Reserve’s pledge to keep interest rates low. Today, the focus shifted to the Fed’s downbeat view of the economy.
And the Dow blew through nearly 520 points, to close below 10,720. The Nasdaq was off 101 points at 2,381. The selling was also driven by concerns about the financial health of Europe’s major banks and the possible effects here.
KEITH BLISS, Cuttone & Company: There’s all these cross lines between U.S. banks and the European banks, so now the thought is, is that if the Europeans banks are in trouble with their own capitalization ratios, it’s going to impact the U.S. banks.
JUDY WOODRUFF: The chairman of one major U.S. bank, Jamie Dimon of J.P. Morgan Chase, insisted there was no cause for panic.
JAMIE DIMON, J.P. Morgan Chase: We have manageable exposure to all the banks. We’re not going to cut and run. We’re very careful of what we do, but we’re not going to leave Europe. There are a lot of companies we have been doing business with, and so we feel quite comfortable with it.
JUDY WOODRUFF: And bank officials across Europe insisted they were victims of unfounded speculation.
ROBERT HALVER, Baader Bank (through translator): There are rumors that some European banks have problems with their bond holdings. But I am convinced that those rumors are unfounded, spread by some market participants to make profits on the up and down of the markets.
JUDY WOODRUFF: But shares in French banks plunged, on worries that France might follow the U.S. and lose its coveted AAA credit rating. And President Nicolas Sarkozy returned early from his vacation for an emergency meeting.
His finance minister announced the French government would go ahead with efforts to reduce the country’s deficit in an effort to shore up confidence.
Meanwhile, late this afternoon, the White House announced that President Obama discussed the U.S. and European situation with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner.