Stocks plunged in the final minutes of trading, sending the
Dow Jones industrials down 678 points to 8579 -- their lowest level in five years -- after
a major credit ratings agency said it was considering cutting its rating on
General Motors Corp.
A year ago Thursday, the Dow closed at a record high above
14,000.
The Standard & Poor's 500 index tumbled 74.58 points,
or 7.57 percent, to finish unofficially at 910.36. The Nasdaq Composite Index
plummeted 95.21 points, or 5.47 percent, to close unofficially at 1,645.12.
The selloff came as Standard & Poor's Ratings Services
put GM and its finance affiliate GMAC LLC under review to see if its rating
should be cut. GM has been struggling with weak car sales in North America.
The action means there is a 50 percent chance that S&P
will lower GM's and GMAC's ratings in the next three months.
General Motors Corp. led the Dow lower, falling about 30
percent.
Earlier Thursday, Wall Street appeared to have gained some confidence after the
government reported that new applications for unemployment benefits dropped
last week from a seven-year high. The Labor Department's report matched
projections, though claims still remain at elevated levels due to the
struggling economy.
Stocks around the world moved mostly higher Thursday -- a day
after the Federal Reserve and other leading central banks cut interest rates to
help unclog the credit markets and stimulate the global economy.
Investors looked to recover from near-panic selling
that cascaded through global markets in the past week. Most Asian markets
finished the day higher after central banks in South Korea, Taiwan and Hong
Kong all slashed interest rates.
There is some hope from investors that Wall Street
is getting closer to finding a bottom after the worst five-day rout since 1987.
"I think the base driver today is that we're
oversold," Arthur Hogan, chief market analyst at Jefferies & Co., told
Reuters "You can't do that too long before things turn around, and I think
the bottom of this market gets put in this week."
IBM, a Dow component, posted third-quarter results
that beat forecasts and reaffirmed its full-year earnings guidance.
Also helping stocks is a Bush administration plan to
invest in hobbled U.S. banks as a way to stabilize the financial sector,
according to the New York Times and the Associated Press. An administration
official, who asked not to be identified because no decision has been made,
told the AP the $700 billion rescue package passed by Congress last week allows
the Treasury Department to inject fresh capital into financial institutions and
get ownership shares in return.
Britain rolled out a similar plan, though no U.K.
bank has received any investments. In Iceland, the government now has control
of all three of the country's major banks as it struggles to contain the panic.
Late Wednesday, the U.S. government again came to
the rescue of American International Group Inc. The Fed agreed to lend $37.8
billion to the ailing insurer, which is on top of an $85 billion loan AIG
received last month.
Investors also will watch for the effect short
selling will have on the market now that a three-week ban imposed by regulators
has expired. Some analysts believe the unprecedented ban -- an effort to
bolster investor confidence amid the worst financial crisis since the stock
market crash of 1929 -- did more harm than good at a time of historic market
volatility.
Meanwhile, oil prices looked for direction as
traders weighed fears that a world recession will crimp demand against
speculation that OPEC may cut output to keep prices from falling too far.
Light, sweet crude for November delivery was up a cent at $88.96 a barrel in
electronic trading on the New York Mercantile Exchange.
Early Thursday, new government data showed that the
number of U.S. workers filing new claims for jobless benefits fell 20,000 last
week, in line with forecasts, as the impact of hurricanes Gustav and Ike eased.
Initial claims for state unemployment insurance
benefits declined to a seasonally adjusted 478,000 in the week ended Oct. 4
from a revised 498,000 the prior week, the Labor Department said. It was the
lowest reading since mid-September, but claims remain at levels indicating a
weak U.S. employment climate.
"The overall message is that the labor market
remains quite weak. We know claims have been boosted by the storms, but the
trend remains sharply up and the economy is deteriorating," Anna Piretti,
senior economist at BNP Paribas in New York, told Reuters.
The four-week average of new jobless claims, a
better gauge of underlying labor trends because it irons out week-to-week
volatility, rose to 482,500 from 474,250 the week before. This was the highest
reading since October 2001.
This measure has mounted steadily as the U.S.
housing slump has chilled growth and crimped hiring.
"We haven't peaked. It's going to get worse.
We're going to lose a lot of jobs in the immediate future," said Nigel
Gault, chief U.S. economist at Global Insight in Lexington, Mass.
The number of people remaining on the benefits roll
after drawing an initial week of aid rose 56,000 to a higher-than-forecast
3.659 million in the week ended Sept. 27, the most recent week for which data is
available.
Analysts estimated so-called continued claims would
be 3.60 million. It was the 24th straight week that claims were above 3 million
in a sign that the slowing economy is making it harder for U.S. workers to find
jobs.
"Payrolls will continue to shrink in the months
ahead. We could see number of minus 100,000 or more. We could see the
unemployment rate could rise to 7 percent. Earnings prospects will worsen and
cut into personal consumption," said Piretti.
