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Dow Wraps Up Volatile Week on an Upbeat Note

October 10, 2008 05:20 PM
by Anne Szustek
The Dow Jones Industrial Average closed at 8,451.19 on Friday, recouping some losses during afternoon trading to end on a positive note one of Wall Street's most volatile weeks ever.

Dow Up on the Downswing

Leading the way during the afternoon rally were financial stocks, namely Wachovia, following its purchase by Wells Fargo. Wachovia's stock rallied 43.06 percent on the back of the news. Wells Fargo stock closed 3.89 percent above Thursday's closing price. Citigroup, which stepped aside from its bid for Wachovia, closed with a 9.13 percent gain.

The Dow and S&P 500 both closed at just one percent down from Friday's opening bell. The Nasdaq, buoyed by a bullish run from teck stocks eBay and Apple, closed slightly up.

Knight Equity Trading's Peter Kenny told CNBC, "We're seeing asset classes across the board being sold—commodities, energy, equities, bonds … That's a sure sign that we're reaching some sort of tipping point in the market and market psychology."

But the Chicago Board Options Exchange Volatility Index, known commonly as the capital markets' "fear index," reached a record high for the fifth day in a row.
CNBC argues that Friday's volume of trading—with some 3 billion shares exchanged—suggests that the market may be bottoming out.

Background: Dow drops below 9,000 for first time in five years

The Dow dropped 678.91 points on Thursday—a loss of 7.31 percent—to close at 8,579.19, the lowest showing Wall Street has seen since 2003. Trepidation over the expiration of the Securities and Exchange Commission’s temporary ban on the short selling of some 700 stocks, concern over the credit market and sluggish consumer spending weighed down on trading.

Thursday marked the seventh consecutive day of losses on the Dow—losing at least 1,300 points since Sept. 30. On Monday the index closed at below the 10,000 mark for the first time since 2004. But the greater paradox lies in the fact that on Oct. 8, 2007—a year and a day earlier—the Dow hit its all-time high of 14, 164.53.

Wall Street players worry that the markets will continue to skid and crumble
as stocks fight to hold value. Bob Doll, the vice chairman of investment management firm BlackRock, told CNBC Thursday, “We need to get some traction at some point in time here to get some sort of rally. We’ve been in this freefall zone, and the Fed’s going to have to get bigger, bolder and in front of things I’m afraid.”

An ever-widening credit market cast uncertainty on the viability of financial and automotive sector stocks. Morgan Stanley’s shares took a hit of nearly 26 percent Thursday. The price-per-share of financial institution Wachovia, the object of a now ended M&A tug of war between Citigroup and Wells Fargo, with the latter prevailing, dropped more than 28 percent the same day. The two banks vying for Wachovia also saw slumps in share prices.

Shares of General Motors dropped more than 31 percent in value, closing out at $4.76, their lowest value since 1950. CNBC reports that they were put on credit watch negative. Shares of Ford sustained a blow of 20 percent, closing at just above $2 per share.

The S&P 500 also slid for the seventh day in a row, dropping 7.4 percent to close at 901.01. That market has lost 38 percent of its value since the start of the year, putting it on track to post its worst annual performance since 1937.

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