RENEE MONTAGNE, host:
This is Morning Edition from NPR News. I'm Renee Montagne.
STEVE INSKEEP, host:
And I'm Steve Inskeep. Good morning. Two days after their amazing recovery, overseas stocks are down again. Japan's market fell more than 11 percent today. European markets are also down, and those declines follow yet another steep plunge in the U.S. stock markets yesterday. Consider the Standard & Poor's Index of 500 companies. That index lost nine percent of its value, and that wiped out nearly all its gains from earlier in the week. NPR's Jim Zarroli is on the line, as he has been so many mornings to explain what's going on. Jim, good morning.
JIM ZARROLI: Good morning, Steve.
INSKEEP: What happened this time?
ZARROLI: It was just another, you know, stunning decline. October is really living up to its historical reputation as a terrible time for the stock market. This - yesterday's drop was the biggest percentage decline in the Dow since October 1987 when we had the big crash. I think people are just starting to realize that the problems in the economy are real. They're not going to go away anytime soon. That's being felt in the markets. We had a really disappointing retail sales report yesterday. And that's really scary because we're heading into the holiday shopping season, which is when a lot of retailers do much of their business. Basically, the only part of the retail sector that is doing better right now is service stations. We also had the Federal Reserve issue a survey of economic conditions which it calls the Beige Book, which basically said, you know, things are slowing down almost anywhere you look in the country.
INSKEEP: Jim, I want to understand if two different things have happened here, if maybe some of the declines in previous days were because of a panic about credit, but now you're telling us that this is more about basic signs, ordinary signs of a slowdown in the economy.
ZARROLI: Yeah. And I think it's scaring a lot of investors. I think one of the things we're seeing is people starting - people more and more pulling money out of stock funds. And more and more big institutional investors like hedge funds are selling off shares. A lot of hedge funds basically borrowed to buy stocks. Now they need to raise money to pay what they owe. And to do this, they're having to sell assets, sell stock. And when they do this, this causes prices to fall even further. So it's kind of a vicious cycle.
INSKEEP: At the same time, though, Jim Zarroli, we are seeing signs that interest rates are coming down. What does that mean for this concern about credit, about getting loans?
ZARROLI: Well, we have seen over the past day or so, we've seen a bit of a decline in what is called the London Interbank Offered Rate, LIBOR, which we're all becoming a bit more familiar with. It's used to determine interest rates in the United States. That's a positive sign. I mean, we're also seeing numbers come down a bit in the commercial paper market. This is where companies go to get short-term loans for things like meeting payroll. You know, the declines have been small. The rates are still in historic terms, very high. But at least, they're coming down, which is something you couldn't have said last week.
INSKEEP: Does that mean that all these bailouts are starting to work?
ZARROLI: Well, it could be. You know, this week we saw the government announce that it would buy stock in major banks. The same thing has been done overseas. Just today we found out that the Swiss government is taking steps to prop up UBS and Credit Suisse. We saw a coordinated interest rate cut by the world central banks last week. You know, we have seen the government guarantee loans between banks, a lot of efforts to get more capital into the system.
You know, at some point, it has to make a difference. Of course, you know, things are so volatile right now that we probably need to sit back and not read too much into small movements. They've happened like this before during this crisis. But you know, if you're an optimistic person, you might say things are turning around.
INSKEEP: Jim, thanks very much.
ZARROLI: You're welcome.
INSKEEP: That's NPR's Jim Zarroli.
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