Wall Street hammered
(Straits Times) – US STOCKS plunged on Thursday on a spate of weak economic news, corporate woes and disappointment about the lack of an expected new Chinese economic stimulus plan.
The Dow Jones Industrial Average sank 281.40 points (4.09 per cent) to 6,594.44 just after the closing bell, tumbling to a new 12-year low.
The Nasdaq composite shed 54.15 points (4.00 per cent) to 1,299.59 while the broad-market Standard & Poor's 500 skidded to its lowest level since late 1996, dropping 30.32 points (4.25 per cent) to a preliminary close of 682.55.
The market was hit by a wave of negative news, led by fears about the survival of General Motors after the struggling automaker warned it could face liquidation due to the economic meltdown.
The market was also disappointed that China failed to deliver a hoped-for economic stimulus – prospects for which had sparked a big rally in global markets on Wednesday.
Sacha Tihanyi at Scotia Capital said the market has been desperately seeking some positive news and that China was unlikely to deliver it.
'Expecting Chinese stimulus to provide a boost to global economic fundamentals and help drive a sustainable rally in equities is somewhat like putting the cart before the horse,' the analyst said.
'In fact we'd only half jokingly suggest that for Chinese stimulus to work immediate wonders in boosting China's economy, they might be better off giving stimulus funds to the West to subsidize consumption of imported Chinese goods.' The market digested more weak economic news, including data showing initial claims for US unemployment benefits fell slightly to 639,000 but remained near 26-year highs.
A separate report showed a disappointing 0.4 per cent drop in US labor productivity in the fourth quarter.
'This is a classic bad news/bad news story,' said Nariman Behravesh, chief economist at Global Insight.
'The bad news is that output is plummeting. The equally bad news is that employment and hours are being cut dramatically. Unfortunately, many companies will have no choice but to keep cutting jobs and hours.'
