Volatile Day for U.S. Markets

Anxiety over a potential U.S. recession is driving active trading, despite a dramatic move by the Federal Reserve to cut a key interest rate. It's a roller-coaster ride for the American financial sector.

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It's MORNING EDITION from NPR News. Good morning. I'm Steve Inskeep.

RENEE MONTAGNE, host:

And I'm Renee Montagne.

While the U.S. market was on holiday yesterday, the rest of the world saw a tremendous global sell-off, and that continues today. In some places, it's gotten even worse. India had to stop trading for an hour after its main index fell more than 10 percent. Tokyo's Nikkei has lost almost as much over the last two days. In Europe, the picture is mixed. Some stock indexes have actually gone up in - at least for now. And all eyes are on the U.S. stock markets, which were closed, of course, yesterday, but are be - will be opening today.

NPR's Adam Davidson is monitoring the world markets, and he joins us now. What are people expecting when the New York Stock Exchange opens in just a few hours?

ADAM DAVIDSON: We have a sense of what we can expect because of these stock market futures. These are people around the world who are placing bets on -with their money - on what the markets will do. And they are down. They're down recently dramatically, around five percent on the S&P 500 and the NASDAQ, 4 and a half percent for the Dow Jones. And that is in line with what analysts and others were predicting. Of course, it will be a volatile day. We can expect a lot of trading, and who knows where it'll be when the markets close in many hours. But when they open, it's a safe bet that they will be opening considerably down - something like what we saw yesterday or this morning in Asia.

BRAND: And tell us more about what happened there in Asia and Europe.

DAVIDSON: Well, Asia was really bad today - bad for the stock markets, bad for the stock indices, down even more than yesterday in many places. India had to stop trading because it fell so dramatically. Then when they opened trading, it fell even more dramatically, falling 13 percent today. That's a huge, huge, huge one-day they drop. Tokyo's Nikkei fell more than it did yesterday for a two-day 10 percent fall. That's the sort of technical correction level. You can use the word correction. Hong Kong fell more. Jakarta fell more - really, really dramatic huge drops.

Europe is a totally different picture. It's been bouncing. I've been monitoring it for the last couple of hours. It's been bouncing up and down. Now, mostly, indexes are up a tiny bit in Belgium and France. I see Germany is down a tiny bit, but it was up just the last time I checked. London's FTSE is up. It's been up and down all day.

So what analysts are saying is that in Europe, there are all these rumors that Ben Bernanke in the U.S. Fed is going to do something dramatic later today, and - that will turn this around by cutting interest rates by a full half percent. I'm not saying that's going to happen. I'm just saying that's the rumor. I don't know that those investors know anything we don't know. But that rumor seems to be getting the markets to do a little bit better.

MONTAGNE: Well, that's all tied-in with fears of a U.S. recession. Is that the reason for the falling stocks in the first place?

DAVIDSON: Yeah, this really is - I mean, if we want to look for any kind of silver lining, this - and I don't know if this is one. But we can see that the last two days really reminds us that the U.S. is still very much the center of the global economy, that U.S. demand for goods and services from around the world are the engine that powers almost all economies around the world.

Some thought that 2008 was the year when that would no longer be the case. It would be the year that the rest of the world could kind of hum along pretty well, even if the U.S. was in an economic downturn or a recession. At least the evidence of the last couple of days is that it's not the case. The world really needs the U.S., and the world gets really scared when it thinks the U.S. is getting into a recession.

MONTAGNE: Well, just briefly, how do these dramatic falls in the stock market affect us - the rest of us?

DAVIDSON: The ones who aren't actively trading stocks. The ones who…

MONTAGNE: Right - every hour.

DAVIDSON: Right, exactly. You know, economists talk about the real economy, meaning everyday people, food, rent, you know, your job - that sort of thing. If this was happening in a few sectors or in a few countries, we could probably say it's contained. The fact that it is so broad across all sectors, across all countries really tells you that what's happening is the people who seem to know the economy the best are very pessimistic about the near term. And that is bad news for the rest of us.

MONTAGNE: Adam, thanks very much. NPR's Adam Davidson, recapping the news global stock markets fell for a second day amid fears that the U.S. economy is heading towards a recession. There are worries that troubles in the economy could cause a worldwide downturn. And we'll continue to follow this story as markets open here in the U.S.

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