Investors hopped back on Wall Streets roller coaster today, sending share prices briefly higher in early trading after Wednesdays sharp decline. But while a tame inflation report for September offered a glint of economic hope, recession fears prevailed and gains proved fleeting.
The Dow Jones industrial average fell 221.66, or 2.6%, to 8,356.25 after climbing almost 140 points off the opening bell. The S&P 500 index was off 21.59, or 2.4%, to 886.25, and the Nasdaq composite index lost 38.85 points, or 2.4%, to 1,589.48.
Despite a report this morning from the Commerce Department that consumer prices were flat in September, a sign that rapidly falling energy prices and the economic downturn are easing inflationary pressures, recession fears prevailed. The Federal Reserve Bank of Philadelphias measure of manufacturing posted a record drop in October, worse than economists had forecast. The business activity index slumped to -37.5 from 3.8 in September. A reading below zero indicates contraction.
If the economic news werent enough to keep investors eyes on the exits, a batch of third-quarter earnings reports from key U.S. companies did the trick. Results came in from key financial companies caught in the credit crisis, including Merrill Lynch & Co. and Citigroup Inc., while investors awaited IBM Corp.s third-quarter report later today. Merrills third-quarter net loss of $7.5 billion was worse than expected and Citigroup reported a $2.82 billion net loss, largely in line with expectations.
On Wednesday, the Dow closed down 733.08, or 7.9%, at 8,577.91, recording its second-largest single-day point drop. The S&P 500 fell 90.17, or 9%, ending at 907.84; and the Nasdaq composite closed down 150.68, or 8.5%, at 1,628.33.
Wednesdays sell-off was ushered in by a raft of disappointing economic news that included a record drop in the Federal Reserve Bank of New Yorks Empire State manufacturing index, a 1.2% decline in retail sales in September and a report from the Federal Reserve showing widespread weakness throughout the country.
In addition, in remarks to the Economic Club of New York, Fed Chairman Ben Bernanke said economic activity will fall short of potential for a time.