Stocks Decline on Unemployment, Factory Reports

NEW YORK - Stocks tumbled and credit markets remained tight Thursday after plunging factor orders and a seven-year high in jobless claims stoked fears that the government's financial rescue plan might not be enough to ward off a recession. The Dow Jones industrials fell nearly 230 points, their fourth straight triple-digit move.

Investors appeared to be pulling more money out of the market and settling in for a prolonged economic winter. The main concern is that the $700 billion bailout plan won't be enough to stimulate growth, and the latest economic reports delivered on Tuesday demonstrate that the economy continues to struggle.

The government said the number of people seeking unemployment benefits rose last week and that demand at the nation's factories has fallen by the largest amount in nearly two years. The market is interpreting the Commerce Department report on factories as a sign that tight credit conditions are hitting manufacturers.

"The economy is what's driving this weakness," said Subodh Kumar, global investment strategist at Toronto-based Subodh Kumar & Associates. "I think now what's going on is a focus on the economic weakness in a whole bunch of areas."

He said "the next couple of days are going to be pretty intense politically" as Wall Street girds for another vote on the financial bailout plan.

The bill that passed the Senate late Wednesday will be sent to the House as soon as Friday. The latest version of the bill adds $100 billion in tax breaks for businesses and the middle class and raises the limit on federal deposit insurance to $250,000 from $100,000.

Supporters are hoping the sweetened bill will be more palatable to some of the 133 House Republicans who rejected the measure in a vote Monday that took Wall Street, and many on Capitol Hill, by surprise.

Those in favor of the plan to let the government buy billions of dollars in bad mortgage debt and other now-toxic assets say it will help unclog the world's ailing credit markets. Banks are fearful of making loans, even to each other, because of worries they won't be repaid. That, in turn, is weighing on the economy, making borrowing more difficult and expensive for businesses and consumers alike.

The credit markets showed some increased strain on Thursday. The yield on the 3-month T-bill, the safest type of investment, rose to 0.80 percent from 0.79 percent late Wednesday. The historically low yields indicate investors are willing to accept the smallest of returns to safeguard their money.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.66 percent from 3.74 percent late Wednesday.

The Dow fell 226.52, or 2.09 percent, to 10,604.55. The blue chips plunged nearly 778 points Monday, logged a partial rebound Tuesday and finished moderately lower Wednesday.

Broader stock indicators also fell sharply Thursday. The Standard & Poor's 500 index fell 29.00, or 2.50 percent, to 1,132.06, and the Nasdaq composite index fell 53.08, or 2.56 percent, to 2,016.32.


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