Dow Sinks Following Slide In Global Markets Markets all over the world posted significant losses Friday, following another rough day on Wall Street on Thursday. The Dow Jones industrial average plunged at the beginning of trading Friday, but recovered a bit by midday.
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Dow Sinks Following Slide In Global Markets

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Dow Sinks Following Slide In Global Markets

Dow Sinks Following Slide In Global Markets

Dow Sinks Following Slide In Global Markets

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Markets all over the world posted significant losses Friday, following another rough day on Wall Street on Thursday. The Dow Jones industrial average plunged at the beginning of trading Friday, but recovered a bit by midday.

ALEX CHADWICK, host:

From the studios of NPR West, this is Day to Day. I'm Alex Chadwick.

MADELEINE BRAND, host:

I'm Madeleine Brand. Coming up, the election is less than two weeks away and we'll choose a new president, but who will the president choose to help run the country? We will find out in just a moment.

CHADWICK: First, a grim day for world stock markets. Japan's Nikkei Index was down 9.6 percent. That is the worst drop since 1982, and that was a long time ago. The Pan-European Dow Jones Stoxx Index was off 8.4 percent, the first time since 2003. And for what is happening here in the U.S., NPR's Chris Arnold joins us now. Chris, I think everybody was maybe a little afraid today that the U.S. stock market was just going to slide right off the shelf. What happened?

CHRIS ARNOLD: Hi, Alex. Yeah, before the market even opened, the Dow futures were off 550 points. And when that happens, the system kind of locks up, so there was a lot of speculation that this could be a really horrible day for the U.S. stock market. But you know, down 200, 300, 400 points is sort of a normal day these days, for better, for worse.

CHADWICK: That's a good day.

ARNOLD: So, you know, you can't really read too much into it. But one thing you can say is, people are being a little optimistic in saying, you know, this could be sort of testing the bottom here. You know, OK, we have all this horrible news in world markets and still the Dow didn't go below 8,000, you know? So, that's - that's maybe a good sign.

CHADWICK: Everyone who really wanted to sell has sold, and now you're just kind of muddling around.

ARNOLD: There have been some encouraging signs this week, and there's been a lot of concern about the frozen credit markets. And for people who don't understand that, but most people would understand exactly what that means, this is basically the plumbing for the economy. If you think of money as sort of the tap water of the economy, there's a lot of banks and corporations right now who are turning on their faucets and there's nothing coming out. There's just a trickle of money coming out, and that's happening because banks are sitting on cash. They are afraid to lend it out, and because of that, hotels aren't getting built, companies can't buy equipments. It could push unemployment a lot higher. It looks like that old problem, though, with these frozen credit markets is getting a lot better.

CHADWICK: So, what about the big money-market funds that was news earlier this week? The government said, we're going to put money into those and guarantee those funds, or at least partly guarantee them. What's going on there?

ARNOLD: Yeah, the money-market funds are a huge part of this whole thing. They're basically a giant reservoir of that money, trillions of dollars. And normally that money flows out through short-term loans to banks and corporations. The government has taken steps to encourage that to happen, again, because money-market funds haven't been loaning that money out. Just this week, the ice really started to break up there. I talked to one big fund manager at Vanguard, this giant mutual-fund company. He just sold 10 billion dollars in treasuries and put it back into the system, basically. You can see the LIBOR rates coming down. This is a rate that attracts some of those. You know, the pipes are thawing, and that's very good.

CHADWICK: And one more item, back where all this started, Chris, housing.

ARNOLD: Yes, it's where it started. It remains a giant mess. We've got millions of people - could still lose their homes to foreclosures. The government is recognizing it needs to do something about that. There was one glimmer of hope here. The sales of existing homes were up five percent. That's somewhat encouraging, but there is still a lot of problems.

CHADWICK: NPR's Chris Arnold, watching the market for us. Thank you, Chris.

ARNOLD: Thanks, Alex.

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U.S., World Stock Markets End Hectic Week Down

It has been another day of turmoil on Wall Street as the prospect of a global recession moved closer to reality and investors around the world responded by selling big. There were also troubling signs that the economies of Hungary, Ukraine and Belarus could go the way of Iceland.

The Dow Jones industrial average fell precipitously at the opening bell Friday, plunging more than 400 points, or 5 percent, in the first five minutes. After a volatile day of trading, the Dow closed down 312 points to 8,378, while all the major indexes fell more than 3 percent.

Britain said Friday that its economy had contracted in the third quarter, putting one of the world's key financial bulwarks on the cusp of recession. Japan's corporate flagship, Sony, lowered its earnings forecast.

The bad news sent world markets to their lowest levels in five years, with Japan's Nikkei and France's CAC40 down 10 percent and Britain's FTSE 100 down 5 percent. In Hong Kong, the Hang Seng index fell 8.3 percent to 12,618.

The gloom and doom on world markets also stacked the deck against Wall Street, as the New York Stock Exchange was forced to put halt selling ahead of the open after Dow futures fell as much as 550 points. So-called circuit breakers were also triggered for the Standard & Poor's 500 futures index and the Nasdaq 100 futures index, both of which fell more than 6 percent ahead of the open.

In Japan, Sony's shares slid more than 14 percent after it slashed its earnings forecast for the fiscal year. In Germany, Daimler's stock dropped 11.4 percent in morning trading after it reported lower third-quarter earnings and abandoned its 2008 profit and revenue guidance.

Investors bet on either the dollar or the Japanese yen as safe havens, forcing the greenback to a 13-year low below 93 yen but to a two-year high against a basket of currencies and the euro. The British pound hit a six-year low.

The tailspin in world equity markets has been exacerbated by big hedge funds that have dumped holdings to raise cash.

Emerging markets took a pounding. India, Thailand, Indonesia and the Philippines saw huge sell-offs as investors sought to cut their exposure to risky assets and meet redemption needs at home.

Meanwhile, ratings agencies have downgraded a string of countries, particularly in central and Eastern Europe. The International Monetary Fund has been in discussions with Pakistan, Belarus, Serbia, Hungary, Turkey and Ukraine about possible help for their economies, which have been clobbered by capital flight.

Meanwhile, Iceland's highly indebted banking sector has all but collapsed, leaving the country dependent on the IMF or Russia for a bailout.

OPEC on Friday announced a production cut of 1.5 million barrels a day to shore up the falling price of oil, but the move had little effect amid gloom about future demand because of the global slowdown. Light sweet crude traded lower, near $63 a barrel.

One bright spot, however, came from a major source of the current woes: U.S. housing. The National Association of Realtors said Friday that sales of existing homes rose 5.5 percent in September, the largest increase in more than five years, in a possible sign that the housing slump could be starting to bottom out.