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- Meat-processing plant faces $70K penalty for Clean Water Act violations (1/17/17)4
- Area residents among those attending inauguration, women's march (1/22/17)90
- Comedian, cancer survivor Tom Green headlines sold-out Cancer Center benefit (1/22/17)
Recession fears, weak earnings stoke sell-off
NEW YORK -- After three days of relative calm, turbulence returned to Wall Street on Wednesday. Warnings of a deep recession and weak corporate earnings took the Dow Jones industrial average down 514 points amid fears that government intervention won't be enough to prevent global economies from faltering.
Previous drops -- two of them more than 700 points -- were followed by rebounds. If that doesn't happen this time, the Dow could slip closer to closing below the 8,000 mark, which hasn't happened since March 31, 2003.
Wednesday's sell-off came after poor earnings from large companies in disparate sectors -- Wachovia Corp., Boeing and Merck & Co. -- illustrated how wide the economic downturn has spread. One bright spot was McDonald's Corp., where third-quarter profits rose thanks to the strength of its low-priced meals.
Even with the aggressive steps the government has already taken, Treasury Secretary Henry Paulson said Americans would "have a number of difficult months ahead of us in terms of the real economy."
Since stocks began tumbling Sept. 15, the Dow has plunged as low as 8,451.19, its close Oct. 10. On Wednesday, it closed at 8,519.21.
Big rallies Oct. 13 and Oct. 16 were enough to send all the major indexes higher, giving Wall Street its best week since 2003. The Dow gained 4.75 percent for the week -- a gain that was erased in Wednesday's trading alone.
This week, the Dow had climbed 413 points Monday, then dropped 231 points Tuesday.
On Wednesday, most major indexes fell 5 percent or more, with the Standard & Poor's 500 down 6 percent. Oil prices hit lows last seen in June 2007, trading below $67 a barrel on worries about weakening demand.
Mutual funds, pension funds and individual investors lost $700 billion in Wednesday's trading. It was the fifth time since Sept. 29 that the broadest measure of U.S. stocks, the Dow Jones Wilshire 5,000, had lost more than 5 percent in a day. During the prior 25 years, it had only eight days that bad.
For the week, the Dow is up 3.76 percent, the Standard & Poor's 500 index is up 4.65 percent and the Nasdaq composite is down 5.58 percent.
World leaders will gather Nov. 15 in Washington to discuss the meltdown. A senior administration official said Wednesday that the forum will be the first in a series of international meetings to discuss what economists predict could be a long and deep downturn.
The official arbiter of recessions, the nonpartisan National Bureau of Economic Research, has not called the current downturn a recession.
Meanwhile, members of Congress are moving forward with efforts to overhaul the regulatory system. The changes could be the most sweeping since the 1930s, when Congress revamped how the financial system was regulated in response to the 1929 stock market crash and a wave of bank failures.
Democrats in Congress are also pushing efforts to assemble a second economic stimulus program that could total $150 billion or more. On Monday, Fed chairman Ben Bernanke said a "significant" stimulus package is appropriate. The White House has yet to endorse the idea, but has said President Bush was at least willing to consider a second stimulus measure.