U.S. equities ended lower today after a series of wide swings despite coordinated interest rate cuts by the Federal Reserve and other central banks.
The Dow Jones industrial average closed down 189.01, or 2%, at 9,258.10; the S&P 500 fell 11.29, or 1.13%, ending at 984.94; and the Nasdaq composite closed down 14.55, or 0.83%, at 1,740.33. All numbers are preliminary.
Treasury Secretary Henry Paulson added to the morose mood late in the day as he told reporters in Washington that government agencies will work to contain risks to the financial system that might arise from problems at individual institutions.
The lack of follow-through to todays coordinated interest rate cuts is not all that surprising in light of the deeply rooted anxieties that exist amongst investors. It will take time for frayed nerves to calm and for emotions to catch up to facts, said Tony Crescenzi, senior bond strategist at Miller Tabak + Co. in New York.
The Federal Reserve cut the federal funds rate to 1.5% from 2%, while the European Central Bank, the Bank of England, the Bank of Canada and Swedens Riksbank lowered their rates by a similar half-point. The Fed also lowered the discount rate to 1.75% from 2.25%, and the Swiss National Bank eased rates as well.
The central banks said in a joint statement that given the recent intensification of the financial crisis some easing of global monetary conditions is therefore warranted.
But the moves, intended to release strain on money markets, boosted anxiety that major economic problems are unfolding, leading markets in Europe and the U.S. to fluctuate through most of their sessions.
Financials remained weak. Bank of America Corp. shares continued their retreat after lackluster demand for its $10 billion note offering, while Morgan Stanley ended lower again amid concern about its capitalization.
One trader said uncertainty is likely to weigh on Asian markets overnight, although Chinas central bank eased market rates by 0.27 points while the Bank of Japan expressed support for the coordinated moves after the Nikkei 225 index suffered its biggest one-day loss since the market crash of 1987. Russia, where the stock market was again closed because of widespread selling, pledged $36 billion to shore up its banking system.