UPDATES with early US market action
Investors around the world are running scared again today, dumping assets on an enormous scale.
Stocks in the United States tumbled at the opening, following steep slides on Asian and European markets.
But the drop, while steep, was not the plunge that the futures contracts had indicated earlier today.
There was much talk this morning over whether the New York Stock Exchange would need to employ its "circuit breakers" in morning trading. If the Dow falls 1,100 points or more before 2 p.m., the exchange will halt trading for an hour.
After 10 minutes of trading, the Dow Jones industrial average was down more than 400 points.
The global sell-off has been triggered by one big company after another reporting weak earnings or expecting a slowdown ahead. Much of the world is sliding into a recession.
Yet all that was known before today. What has changed in the last 12 hours is a brake-squealing U-turn in the mood of investors.
Those who saw a tiny glimmer of hope have fled, and the market is now embracing a wholesale abandonment of equities: It's what Wall Street professionals call a "capitulation." Sell. Everything. Now. In particular, hedge funds, which have been hammered by the financial crisis, have been seen furiously unloading stocks.
"The panic levels are now quite unseen," Christian Gattiker at Bank Julius Baer told Bloomberg News.
Today may be the day for nuclear-winter bears like economist Nouriel Roubini, a.k.a. "Dr Doom." Roubini writes today:
"We have now reached a point where fundamentals and long-term valuation considerations do not matter any more for financial markets. There is a free fall as most investors are rapidly deleveraging, and we are on the verge of a capitulation collapse.
What matters now is only flows—rather than stocks and fundamentals—and flows are unidirectional as everyone is selling and no one is buying as trying to buy equities is like catching a falling knife. There are no buyers in these dysfunctional markets, only sellers. And panic is the ugly state of this destabilizing game."
The only positive here is that the bloodletting, if it continues in the U.S. trading day, could be a good thing. Flush out the investors who cannot stay in at any price. Speed up this slow-motion crash and get it over with.
The global wave of selling today began in Tokyo, where Japanese stocks fell nearly
10 percent to their lowest levels in more than five years. A profit warning by Sony on Thursday weighed on that market. Hong Kong fell 8.3
percent, while Seoul tumbled 10.6 percent.
European markets are sharply lower. London stocks fell 9 percent after data showed that the British economy contracted in the third quarter.
Frankfurt was also down 9 percent; Paris slid 8 percent. Shares of banks and automakers were among the weakest.
From Portfolio.com: News and Markets by Jeffrey Cane Related Links
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