Crazy Day: Dow Falls 800 Points Then Rebounds And Bank Of America Cuts Forecasts

Crazy day on Wall Street once again today; the Dow Jones fell almost 800 points during intra-day trading due to growing fears over the financial crisis and a possible recession. Nearly six out of ten Americans believe another economic depression is likely, according to a poll released by The CNN/Opinion Research Corp. The Dow recovered and ended today’s session down only 369.88 points or 3.58% to close below 10,000 at 9,955.50. The Dow fell below 10,000 for the first time in four years. The Nasdaq fell 84.43 points or 4.34% to settle at 1,862.96. The S&P500 ended the day at 1,056.89 falling 42.34 points or 3.85%. The 10 year Treasury note fell 598 basis points to a yield of 3.4260%.

Crude oil fell 5.25% or $4.93 to settle at a price of $88.95 per barrel due to global market concerns and the potential for a slowing fuel demand. A good indication of this potential slow down can be seen in the demand of crude oil from China, the world’s #2 oil consumer. For the second straight month China will not import gasoline and will instead export the fuel due to large domestic supplies and a decrease in demand. The Dollar had another strong day against the Euro and is currently trading at 0.7398 vs. the Euro. Against the Yen the Dollar fell slightly today to settle at 101.93 vs. the Yen. Gold posted a strong performance today as investors fled equities for some security in the metals commodity markets. Gold settled at $861.90 an ounce, rising 3.98%or $33.00.

Bank of America (BAC) reported its third quarter results today, much earlier than anticipated, and reported a 68% drop in profit. Bank of America also announced it plans to raise capital by selling $10 billion in common stock and cutting its dividend in half from $0.64 to $0.32. For the quarter, Profit fell to $1.18 billion, or $0.15 per share, from $3.7 billion, or $0.82 cents per share in the year ago quarter. Analysts expected earnings to come in at $0.62 per share.

Wachovia (WB), Citigroup (C) and Wells Fargo (WFC), in consultation with the Federal Reserve, have agreed to a standstill of all formal litigation activity. The agreement is scheduled to end on Wednesday. Last week, Citigroup agreed to buy Wachovia’s banking assets for $2.1 billion in a deal brokered by the FDIC, but on Friday, Wells Fargo said it agreed to buy the bank for $15.1 billion without any government support. Citigroup threatened to sue Wells Fargo as they felt that Wells Fargo over the deal as they felt they already had a binding contract in place. It will be interesting to see in who ends up getting the go-ahead to purchase Wachovia and what possible implications this may have on Wall Street.

The Chairman of the Federal Deposit Insurance Corp. announced today that banking regulators are working aggressively to implement higher deposit insurance limits and to make sure that there will be sufficient funds to cover the losses from more potential bank failures. The temporary increase in deposit insurance from $100,000 to $250,000 was part of a $700 billion government rescue plan. The Chairman of the FDIC noted that this temporary increase does not solve all of the problems in the industry, but will give depositors confidence in the safety of their money.

Neel Kashkari, the Treasury’s assistant secretary for international affairs, was selected today by Henry Paulson to be the interim head of Treasury’s new Office of Financial Stability, in charge of the $700 bailout plan for financial institutions.

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