U.S. stocks plunged early today, with the Dow Jones industrial average falling below the 10,000 level for the first time in more than three years, amid fears of a global economic slowdown, even though the Federal Reserve offered more support to the ailing banking system.
In late morning trading, the Dow Jones industrial average was down 485.77, or 4.7%, at 9,839.61; the S&P 500 was down 58.05, or 5.28% at 1,040.68; and the Nasdaq composite was down 111.17, or 5.71%, at 1,836.22.
The Dow last fell below 10,000 on intraday trading April 20, 2005, when it dipped to 9,978.74. The last time the Dow closed below 10,000 was Oct. 26, 2004, when the blue-chip index ended at 9,888.48.
Stock markets around the world had been mired in red ink overnight, setting the tone for the Dow to fall more than 500 points at one point in morning trading while the Fed said it will start paying interest on bank reserves.
“The Fed took advantage of the new powers (under the Emergency Economic Stabilization Act of 2008, enacted Friday) it was granted by announcing that it will begin to pay interest rates on reserves it holds on behalf of depository institutions, an action that gives the Fed the ability to engage in quantitative easing of monetary policy and which can be as powerful as interest rate cuts,” said Tony Crescenzi, chief bond market strategist at Miller Tabak in New York.
A minority of analysts said paying interest on reserves may prevent the Fed from cutting the 2% federal funds rate when policy-makers next meet Oct. 29. The U.S. dollar jumped against the euro today on news the German government announced a $68 billion rescue package for bank Hypo Real Estate Holding AG.
Fears of a global slowdown continued to put pressure on crude oil prices, with the light sweet crude contract for November delivery dipping below $90 a barrel in morning trading on the New York Mercantile Exchange.
