The market ended on the day’s low as the Dow tumbled 5.11% to 9,447.11, and the Nasdaq closed down 5.80% to 1,754.88. On the day following the Dow’s historic drop past 10,000, another psychological barrier was broken when the S&P500 fell 60.66 points, or 5.74%, and dropped below 1,000 for the first time since 2003. In the news today, Fed Chairman Ben Bernanke commented about the grim future of the U.S. economy as he predicted the international financial crisis will continue into the better part of the next year.
Bernanke continued his comment by suggesting a possible rate cut will be made to try and ease investors’ unease and provide aid to the current credit crises. The Fed is scheduled to meet on October 28-29. but many investors believe an emergency rate cut might be in order before the scheduled meeting. Investors today seemed to disregard this hint, and put more weight on Bernanke’s gloomy economic outlook.
The Federal Reserve’s announcement of the August 2008 Consumer Credit Report gave Wall Street another reason for a bearish day. The consensus was an estimated $5.0 billion dollars for the month of August, however, the estimate was off by a staggering -$12.9 billion. The actual Consumer Credit for August was posted at -$7.9 billion, a change of -$13.1 billion from July. This drastic change has put the U.S. economic crises in perspective for some investors on Wall Street. Many investors have felt the worst was behind us, but this credit report and Bernanke’s outlook forces Wall Street to think the U.S. market has not hit the bottom just yet.
In the commodities market, crude oil increased 2.25% to reach a price of $90.06 on the possibility that OPEC might cut production, and the speculation of a future rate cut by the Fed. Gold prices rose 1.89% to $878.90 as investors tried to protect their money from inflation. The Dollar slightly decreased in value against the Euro and the Yen, and is currently trading at $0.7358 versus the Euro, and 101.5500 versus the Yen.
Alcoa Inc. (AA: 16.71, -1.40 (-7.73%)), the largest aluminum producer in the United States, announced today that third-quarter profits have plunged more than 50% because of a lower prices, and a decrease in demand in North America. CEO Klaus Kleinfeld is seeking to reduce production, and decrease long-term power agreements to cut costs. Kleinfeld says prices have dropped more than 22% in the third quarter, and expects demand to fall 5%.
The FDIC is debating on whether or not to let banks hold more Freddie Mac (FRE: 1.29, -0.13 (-9.15%)) and Fannie May (FNM: 1.20, -0.09 (-6.98%)) debt to potentially free up more money for loan purposes. It is unclear whether or not this move will have an impact on the credit banks are willing to lend, because having additional capacity doesn’t mean banks are willing to take on the additional risk involved in this new regulation adjustment.
That’s all for today, catch me tomorrow, same time, same place, for the Bullish Banker’s Daily Market Recap
