Stocks skid on news gov't won't buy banks' assets
NEW YORK A disheartened Wall Street fell for the third straight session Wednesday as investors absorbed another series of dismal corporate reports and news that the government won't buy banks' soured mortgage assets after all. The Dow Jones industrials dropped more than 410 points, and all the major indexes lost more than 4 percent.
China might bar Tiananmen broadcastsThe stock market has lost about $1 trillion over the past three days, according to the Dow Jones Wilshire 5000 index, which reflects the value of nearly all U.S. stocks.
The market started the day falling on more signs that companies are being hurt by a severe pullback in consumer spending. Macy's Inc. said it lost $44 million in the third quarter as sales at the department store retailer fell more than 7 percent. And consumer electronics retailer Best Buy Co. slashed its fiscal 2009 guidance on fears that consumer spending will erode even further.
Meanwhile, Morgan Stanley, suffering from the ongoing losses on Wall Street, outlined plans to cut 10 percent of staff in its institutional securities group its biggest business that covers everything from investment banking to stock trading.
The bleak reports, which followed disappointing news from coffee retailer Starbucks Corp. and homebuilder Toll Brothers Inc. earlier in the week, made it increasingly clear to investors that companies across the economy are suffering from the aftermath of the housing and credit crises.
"There just doesn't appear to be an end in sight to the bad news," said Anton Schutz, portfolio manager of the Burnham Financial Industries Fund and the Burnham Financial Services Fund. "The selling is relentless."
There was more pain at mid-morning, when Treasury Secretary Henry Paulson said the government's $700 billion financial rescue package won't purchase troubled assets from banks. He said that plan would have taken too much time, and that the Treasury instead will rely on buying stakes in banks and encouraging them to resume more normal lending.
While the market had been pleased by the government's decision weeks ago to buy banks' stock, investors still hoped to see the financial industry relieved of the burden of the mortgage assets whose decline in value helped set off the nation's financial crisis. His comments, which underscored the anxiety that remains about the health of the financial system, sent stocks falling further.
Analysts believe the market is in the process of retesting the intraday low hit on Oct. 10, when the blue chips fell to 7,882.50.
"We're just going through the typical process of testing and retesting," said Matt King, chief investment officer of Bell Investment Advisors. "If we can continue to build higher and higher lows, that's definitely a positive. If the Dow can build a base above 8,100 and bounce off that, we see that as a definite technical positive."
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