- The Washington Times - Tuesday, February 17, 2009


Wall Street nosedived in a sell-off Tuesday, burdened with worries ranging from the worsening global economic situation to the U.S. banking system and how long it will take for federal action to turn around the recession-wracked economy.

The markets ignored President Obama’s signing of his $787 billion stimulus package as all three of the major indexes plunged more than 3 percent, the Dow Jones Industrial Average came less than a point from its bear-market low on Nov. 20 and the Standard & Poor’s 500 slipped below 800 for the first time since Nov. 21.

At the close, the Dow Jones Industrial Average dropped 297.81, or 3.79 percent, to 7552.60. The tech-heavy Nasdaq plummeted 63.70, or 4.15 percent, to 1477.66. The broader S&P 500 sank 37.67, or 4.56 percent, to 789.17.

Bank stocks, especially those of regional banks, led the sell-off on light volume. Twenty of the Dow’s 30 stocks declined, CNBC said.

Wall Street’s dive into red ink came as Mr. Obama signed the stimulus legislation into law in Denver, saying it marked “the first step to set our economy on a firm foundation.” But the markets want clear indications of when the new law will start pumping money into the economy, officially in recession for 14 months.

Japan’s 12.7 percent drop in its gross domestic product for the fourth quarter of last year, its worst showing since the 1974 oil embargo, served to underscore the severity of the deepening recession worldwide.

Kevin Feltes, the assistant director of the Jerome Levy Forecasting Center in the New York suburb of Mount Kisco, characterized the Japanese data as “horrific.”

He also told The Washington Times that there was “a lot of concern” about East European banks because their rapid growth made them “very vulnerable because of the export situation.” Exports are down worldwide because of the recession.

At home, Mr. Feltes, a bank specialist, said investors are worried about the banks because their “financial balance sheets are in such bad shape” that even if they received more federal bailout money, “they still will be very weak and will not be lending. It will be difficult to earn profits.”

“Ultimately, the government will be successful in containing the recession, but it’s going to be a hard slog, and it’s not going to be rosy after that,” he said. “It’ll take a long time. We won’t get 25 percent unemployment [as during the Great Depression], but we’re definitely heading into double digits.”

The official unemployment rate is 7.6 percent.

The dollar rose again, a common occurrence in the past few weeks whenever stocks show weakness. Gold also jumped more than $28 to about $971 an ounce, climbing steadily in value during the past few weeks of market uncertainty that made it seem a safe haven for investors.

Light, sweet crude oil fell below $35 a barrel on the New York Mercantile Exchange. But the oil to watch because of its impact on prices at American gas pumps was Brent North Sea crude, which rose beyond $44 a barrel.

A bright spot was Wal-Mart Stores Inc. because of a favorable earnings report in a market that is looking for any signs of hope; it opened up more than 1 percent.

The world’s largest retailer said that its profit for the fourth quarter of its fiscal year ended Jan. 31 fell 7.4 percent, but the company said the reason for that largely was because of the strong dollar and its cost of settling a labor suit.

Excluding those reasons, earnings were $1.03 a share, which beat the 99 cents per share predicted by analysts surveyed by Thomson Reuters. They outperformed the company’s own expectations of earnings of between 91 cents and 94 cents a share. Wal-Mart stock increased in pre-market trading.

The retailer, based in Bentonville, Ark., said it earned $3.79 billion, or 96 cents a share, in the three months ended Jan. 31 compared with $4 billion, or $1.02 a share, a year ago. Sales at stores open at least a year rose 2.8 percent, an indicator that recession-weary shoppers were out looking for bargains.

“Our performance relative to competitors was exceptionally strong in the fourth quarter and throughout the year,” said Wal-Mart CEO Mike Duke in a company statement. “We expect this momentum to continue.”

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