Deep recession fears slam Wall Street

Traders work on the floor of the New York Stock Exchange, October 22, 2008.
REUTERS/Brendan McDermid

NEW YORK (Reuters) – Stocks tumbled to 5 year lows on Wednesday as investors grappled with an increasingly dire outlook for the global economy following a raft of disappointing profits and outlooks from major U.S. companies.

Plummeting commodities prices sent energy and materials company shares sharply lower. Exxon Mobil was the top drag on the Dow, down almost 10 percent.

Boeing Co’s shares fell 7.5 percent after the aircraft maker reported a steep drop in quarterly profit and warned it might need to provide financing to some of its customers in 2009.

AT&T’s shares fell 7.6 percent after the top U.S. phone carrier posted a quarterly profit below Wall Street’s forecasts as it grappled with pressure on wireless margins.

A plunge in emerging market assets and widespread deleveraging were seen as further signs the credit crisis that has plagued the United States and Europe has begun to hit developing countries. Stock markets around the world have fallen sharply over the last two days.

“The themes remain the same: concerns about global recession, deflation and concerns about significantly reduced worldwide demand,” said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.

The Dow Jones industrial average fell 514.45 points, or 5.69 percent, to 8,519.21. The Standard & Poor’s 500 Index dropped 58.27 points, or 6.10 percent, to 896.78, its lowest level since April 2003.

The Nasdaq Composite Index was down 80.93 points, or 4.77 percent, at 1,615.75, closing at it lowest level since June 2003.

Boeing shares fell 7.5 percent to $42.91, where AT&T, another Dow component, slid 7.6 percent to $23.78.

Merck & Co shares fell 6.5 percent to $28.01 after it said it would slash 12 percent of its workforce and tempered its long-range earnings outlook.

Wachovia Corp, which is being bought by Wells Fargo & Co, posted a third-quarter loss of $23.9 billion, a record quarterly loss for a banking company during the credit crisis.

Shares of Wachovia dropped 6.2 percent to $5.71, while Wells Fargo shares lost 4.1 percent to $31.30.

Shares of Exxon Mobil Corp shed 9.7 percent to $64.57. Rival ConocoPhillips, which slashed its 2008 exploration and production outlook, fell 9.1 percent to $49.06.

The S&P energy index slid 10.4 percent.

U.S. front-month crude shed $5.26 to $66.92 a barrel.

SanDisk plunged 31.6 percent to $10.09 after Samsung Electronics ditched its $5.9 billion unsolicited bid for flash memory maker, citing SanDisk’s deepening losses and uncertain outlook.

But Apple Inc bucked the trend, gaining 5.9 percent to $96.87, a day after the iPod maker reported a stronger-than-expected quarterly profit.

Argentina’s government proposed to seize almost $30 billion of private pension funds, while Hungary hiked interest rates to defend its currency.

Interbank borrowing costs fell again, but recession worries held sway as investors fretted about the extent to which the credit crisis has damaged the global economy.

(Reporting by Kristina Cooke)

By Kristina Cooke
Wed Oct 22, 2008 4:32pm EDT

Source: Reuters

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