Feature: Wall St crash in progress?

| January 22, 2008
Feature: Wall St crash in progress

Wall St is expected to crash the moment it opens within a couple of hours, continuing the global trend that has wiped hundreds of billions worth of dollars from share values across the world over the past two days.

Trading at the end of European trading saw futures in US markets plummet more than 500 points, promising a rout on the New York Stock Exchange the moment it opens.

Disappointing earnings reports from the Bank of America, Wachovia, and Ambac are likely to exacerbate tensions among already panicked traders.

A low end fall of 5% would still wipe out over 600 points from the Dow Jones industrial average, but a fall towards 10% – a cumulative figure reflecting combined Asian losses over 2 days – could see trading halted.

In the meantime, stock markets in Europe remain very volatile, with the FTSE 100 losing nearly 250 points in opening trades. Although rallying back after, it is fast losing momentum and turning down again.

Once the Dow Jones opens, stock markets around the world are expected to crash further, continuing another bleak day for investors.

In the meantime, on the hour every hour, we’re going to update events as they unfold on this page, detailing the losses and big movers as they happen.

(Times are in GMT)

UPDATE 1: 14:00 GMT: The Fed announces a shock three-quarter cut in interest rates. It’s an obvious panic move.

UPDATE 2: 14:30 GMT – NYSE Opens: Down 430 points within minutes, now standing at 11,668.39.

UPDATE 3: 14:45 GMT – Minor rally: The DJ is experiencing a minor rally as falls move between 2.3%-3.0%, bringing the DJ average to around 11,800.

UPDATE 4: 15:30 GMT – Continued rally: The rally continues to hold the DJ at around a 1.5%-2.0% loss, much smaller than expected, despite poor earnings reports from Amdac and Bank of America. However, tech stocks are seeing higher than average falls.

UPDATE 5: 16:00 GMT – Stability: The DJ remains relatively stable, with the industrial average remaining only between 1.0%-1.5% down. Most losses were incurred at the beginning of trade on futures traded on European markets.

It appears so far that the Fed’s emergency rate cut has helped avert a full on crash on the NYSE, and stock markets across Europe are now seeing upturns.

However, even if the battle is won, the war remains far from over – economic indicators suggest the US has already entered recession, in which case, trading is likely to remain a bear market for months ahead yet.

UPDATE 6: 16:15 GMT – Rally continues: The DJ has almost completely recovered from it’s original fall – it’s sharpest since July 2002 – and is now trading down just 73.40 points (-0.61%). However, tech stocks are still lagging behind the recovery.

UPDATE 7: 16:45 GMT – Rally loses steam: The Dow Jones remains volatile around a 1.5% decline, with minor rallies being followed by short-term profit taking.

While the Fed’s rate cut has served to prevent a stock market crash, it has clearly failed to rally the NYSE into positive territory, which does not bode well for stock markets after today.

The suggestion before today was that performance on the NYSE would be the litmus test for all that follows. And if a three-quarter percentile cut in interest rates could not usher in a surge in share prices, it suggests the US Treasury has little control left to halt recession.

UPDATE 8: 17:45 GMT – Stability again: The Dow Jones, a key index on the NYSE, remains relatively steady now, with declines remaining fixed between 1.0% and 1.4%.

The overall trend is reasonably stable at present, as can be seen in the graph below, which covers a 24 hour trading period to date on the DJ:

Dow Jones

UPDATE 9: 18:45 GMT – Another minor rally: Another minor rally over the past hour, which took the DJ to 12,063 points, has now lost steam as the index settles back into its previous pattern of stability.

Currently the DJ is showing an index of 11,980.21, down -119.09 (-0.98%) on the day.

UPDATE 10: 20:15 GMT – Continued stability: The DJ index remains stable at just over 1% down on the start of trade, with even the shock rate cut from the Fed unable to invigorate the markets further.

The now relative calm of the markets is graphically visible here, showing the past 24 hours of trading, with the red line designating the DJ index at the open of trade:

Dow Jones 2

UPDATE 11: Session close: The Dow Jones closed at 11971.2, down 128.11 points on the day.


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