RENEE MONTAGNE, host:
This is Morning Edition from NPR News. I'm Renee Montagne.
STEVE INSKEEP, host:
And I'm Steve Inskeep, good morning. We're finishing a week in which the U.S. stock market broke one barrier after another. Unfortunately, each barrier was a floor rather than a ceiling. The Dow Jones Industrial Average dropped below 10,000 for the first time in four years. Then it dropped below 9,000 for the first time in five years. Now this Friday begins with news of massive stock selloffs in Tokyo and elsewhere. NPR's Jim Zarroli is following these developments and joins us now from New York. He's live. Jim, good morning.
JIM ZARROLI: Good morning, Steve.
INSKEEP: I want to ask about this panic selling late yesterday on Wall Street. After all the bad news of recent days and the selloffs responding to that, what could have been left to panic over?
ZARROLI: Well, you know, the short answer is that the stock market is just really incredibly volatile right now, and you tend to see a lot of swings up and down over the course of a single day. Even by those standards, I mean, yesterday was pretty amazing. In less than an hour, the Dow fell about 400 points. Now, one of the reasons was that one of the rating companies had downgraded General Motors. The graders - rating company talked about the rapidly weakening state of the auto market. And GM lost about a third of its share value. And GM is one of the components in the Dow Jones Industrial Average. So when it fell, it helped drag, you know, everything down.
Now, we're also seeing just continuing worries about insurance and financial stocks, and even the good stocks are getting pounded. And it's global. We had the failure of a Japanese insurance company overnight. Stocks in Japan fell. They also fell in Europe, basically taking the lead from the United States.
INSKEEP: How bad is this?
ZARROLI: Yeah, it's pretty remarkable. It was a year ago yesterday that the Dow and the Standard & Poor's 500 Index hit their all-time highs. Since then, the Dow is down nearly 40 percent - 40 percent. The S&P is down even more than that. The Dow has lost 20 percent in October alone. It seems like every day, people are just dumping stocks.
One of the things we're starting to see is that people are pulling their money out of stock mutual funds. There's a research group that said yesterday that withdrawals from stock funds have reached $43 billion in this month alone. A lot of investors are just seeing what's happening and getting scared, and they pull out - pull their money out.
INSKEEP: We're talking with NPR's Jim Zarroli about the stock market. And Jim, I have to mention, just yesterday on this program, our own Frank Langfitt was right on the radio where you are right now and reporting that financial advisers are telling people, don't sell everything right now. That locks in your losses. You can't get your losses back. Aren't people following that advice?
ZARROLI: Well, you know, that's pretty standard advice from financial advisers. That's exactly what they say. They often point to the 1987 stock market crash. I mean, if you had panicked on the day after the crash and taken your money out, you would have missed the chance to make a lot of money because the market basically regained everything it lost within months. The problem now is, you know, we've seen stocks dropping for so long, you know, it gets hard to watch your balance sheet drop day after day without just wanting to run for the exits.
There's a concept in the market called capitulation. It's what happens when stocks have fallen so much that everyone just throws in the towel. You have panic selling. Even the really disciplined investors just bail. The thinking is when you have that, then the market is probably at the bottom. And if you're smart, that's when you buy.
INSKEEP: OK. Does that mean we're at the bottom or near it, Jim?
ZARROLI: Well, you want to think so, but there are just a lot of problems in the economy that haven't been worked out. The most important one is the choked-up credit markets. Yesterday you had spreads between Treasury bills and bank interest rates widen again. You know, it means people are scared about the economy. They don't want - banks don't want to take a chance lending. And this is just hurting auto companies, you know, because people can't get loans. But it's hurting everybody else too.
INSKEEP: So in just a couple of seconds, you're saying that despite all the government's efforts, the credit markets are still not loosening up at the end of this week.
ZARROLI: They haven't seemed to do so, so far.
INSKEEP: Jim, thanks very much.
ZARROLI: You're welcome.
INSKEEP: That's the latest on Wall Street and stock markets around the world from NPR's Jim Zarroli.
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