U.S. equities remained sharply lower in afternoon trading today but prices had largely stabilized after a steep opening drop that was prompted by a global stock market selloff.
Market watchers blamed growing investor concern that a global recession is taking hold for the swift drop in share prices around the world. That fear was stoked in Asia on news overnight that electronics giant Sony Corp. cut its 2009 profit forecast in half. A batch of other profit warnings in Japan added to the pressure.
On Wall Street, the blue-chip Dow Jones industrial average was down 318.75 points, or 3.7%, to 8,372.50, off its opening low of 8,187.48. The S&P 500 index lost 34.50, 3.8%, to 873.61 and the Nasdaq composite index fell 48.60 points, or 3.0%, to 1,555.31 after dropping to 1,493.79 in opening trade.
U.S. share price declines came in the wake of large losses around the globe, with Japan's Nikkei 225 index falling 9.6% to its lowest level since April 2003, and Hong Kong's Hang Seng index down 8.3%. In Europe, Germany's main stock index lost about 5% and France's CAC-40 fell 3.5%. The U.K.'s FTSE index also dropped 5% after a government report showed the first monthly drop in GDP in 16 years.
In a rare event, U.S. equity futures had traded limit down before the opening bell in New York, preventing traders from offering December contracts at lower levels than down 550 points for the DJIA and down 60 points for the S&P 500 contracts. The two levels represented multiyear lows. At one point, DJIA futures were down 6.3%, S&P 500 futures were off 6.6% and Nasdaq 100 futures were down 6.8%.
Analysts slashed their forecasts on a number of major companies around the world on prospects the global economy is heading for lower growth. The selling sparked a U.S. dollar rally, as the U.S. is seen as farther ahead in addressing its housing and financial woes.
The dollar climbed to a two-year high against the euro, below $1.25, while it rebounded against the British pound to $1.526, a six-year low, after Britain reported a greater-than-expected economic contraction in the third quarter.
But the Japanese yen rallied vs. the dollar on a dramatic drop in demand for the carry trade, which allows investors to borrow in low-rate markets to invest in markets offering a higher return.
On the emerging markets front, Belarus, Iceland, Hungary and the Ukraine turned to the International Monetary Fund to ask for emergency loans to shore up their banking systems.
Officials of the Organization of Petroleum Exporting Countries, holding an emergency meeting in Vienna to shore up prices, agreed to cut production by 1.5 million barrels of crude a day, but oil prices still declined in Europe on prospects of lower demand.