- The Washington Times - Thursday, February 19, 2009


Wall Street nosedived Thursday because of worries about the future of banks and mixed economic reports that included increasing unemployment and a surprising surge in inflation, with the Dow closing at its lowest level since the previous bear market in October 2002.

All three major indexes fell more than 1 percent and the Dow Jones Industrial Average dropped below its Nov. 20 post-meltdown low of 7,552.29, which some consider a psychological barrier. The 2002 bear market was caused by the bust in the dot-com bubble, which burst in March 2000.

At the close, the blue chip Dow plunged 89.68, or 1.19 percent, to 7465.95. The Nasdaq, home to many hi-tech companies, fell 25.15, or 1.71 percent, to 1442.82. The broader Standard & Poor’s 500 sank 9.48, or 1.20 percent, to 778.94.

Financials and hi-tech stocks led the sell-off, in part because of concerns about what the Treasury Department has in mind in the “stress test” that it seeks to apply to the major banks. CNBC wondered whether nationalization would be in store for those banks that don’t pass the test.

“Until you get some better outlook for the financials, it will be very tough for the markets,” Alec Young of Standard & Poor’s told CNBC. “It’s hard to make a case for a bottom for the markets” in the absence of information about how the government plans to help the banks out of their crisis.

The price of a barrel of light, sweet crude zoomed upward by more than $4 to close above $39 because oil inventories fell unexpectedly.

The markets opened higher despite the disheartening jobless and inflation numbers from the Labor Department. But they turned negative even though a dim light shone through the gloom of the recession with a report on leading economic indicators.

The Conference Board, a private group, said its index of those 10 indicators rose a surprising 0.4 percent in January, the biggest increase since December 2006. It followed a 0.2 percent rise in December 2008. Economists did not expect any increase for January, according to Thomson Reuters.

In sad news, the Labor Department reported that 4.99 million Americans are receiving unemployment benefits and another 627,000 signed up to get jobless claims last week.

The official unemployment rate stands at 7.6 percent, but the Federal Reserve said in a document produced Wednesday that it expected unemployment to reach 8.8 percent this year as the economy contracts by 1.3 percent.

In a surprise, the inflation rate shot up 0.8 percent at the wholesale level in January, the biggest jump since July, Labor said. Much of the increase was pegged to the rise in gasoline and energy prices. Economists had expected a modest rise of 0.2 percent following a 1.9 percent drop in December.

Further, in good news for homebuyers and homeowners seeking to refinance, the average rate for a fixed 30-year mortgage dropped to 5.04 percent in the week ended Thursday from 5.16 percent a week earlier, said Freddie Mac, the government-controlled mortgage lender.

In the corporate world, Sprint Nextel Corp., the country’s third largest wireless company, reported a loss of $1.6 billion for the final three months of last year because of a write-off of its 2005 purchase of Nextel Communications Inc. and because it lost 1.3 million customers during the quarter.

But the loss was better than expected, and Sprint, based in Overland Park, Kan., predicted that it will lose fewer customers this year. It has about 49.3 million subscribers, an 8.7 percent drop from 2007. The firm said it lost 87 cents a share for the quarter compared with $10.31 a share during the same period a year earlier.

CVS Caremark Corp. declared a profit for the fourth quarter, reporting that it earned 65 cents a share, up from 55 cents a year earlier — a 17 percent gain for the drugstore chain.

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