Dow Plunges Below 9,000 After Paulson Commented On Directly Buying Stakes In Banks

The U.S. Treasury Secretary Henry Paulson made the news today as he commented on the possible options the Treasury might pursue in hopes of easing the credit crunch. The $700 billion dollar bailout plan passed by Congress a few days ago gives the Treasury authority to help out the financial institutions in various ways, not just in mortgage-related assets, but also “any other troubled assets that the Treasury and Federal Reserve deem necessary to promote financial market stability.” Because the credit crisis seems to worsen by the hour, Paulson is debating over whether or not to directly buy stakes in banks.

This news was either disregarded or taken negatively as the U.S market had another horrible day because of fears about the weakening of the global economy. The Dow (^DJI) plunged below 9,000 in the last couple hours of trading. October has been a disappointing month for the Dow Industrial Average since a single positive day has remained unseen. The Nasdaq (^IXIC) and S&P also have experienced the same effects as the Dow. At the closing bell, the Dow, Nasdaq, and S&P were down 7.33%, 5.47%, and 7.60% respectively.

Around the world, markets felt the impact of jittery buyers as the Nikkei and European markets all close at lower levels. Nikkei’s 0.5% drop today left the Japanese exchange at its lowest price in 5 years. The Hang Seng, Seoul Composite, and Straits Times were the only indices in Asia with something to be happy about, and all ended positive. The FTSE (^FTSE) dropped 1.21%, the DAX (^GDAXI) lost 2.53%, while the CAC 40 (^FCHI) fell 1.55%.

In the commodities market, crude oil continues to fall as OPEC announces an emergency meeting being held next month to discuss the chaos in the current market. It last traded at 87.33, down 1.82% on the day. Gold declines 2.3% as the other metals headed in the opposite direction. Platinum traded up 3.15%.

Although the Dollar opened higher today, during the market hours it fell against the Yen once again, and is now trading at $99.96. In this market condition, the Yen is predicted to continue to gain on the Dollar. The USD went back and forth with the Euro, and by the closing bell, ended the day on top at a price of $0.7342.

On no specific news, General Motor’s (GM) market cap has dropped below the 1929 levels. Before the Great Depression, GM’s market cap was around $4 billion, today it’s worth $3.8 in real dollars. Adjusted for inflation, the cap was $48 billion in 2008 dollars. After the major drop, the S&P put GM on credit watch negative, which means their junk-level rating could face another downgrade. Watch the news for more actions in the future against GM and the other auto manufacturers.

Regional bank National City (NCC) is approaching other banks such as PNC Financial Services Inc. (PNC), and Bank of Nova Scotia (BNS) for an potential acquisition.

Disclosure: None.

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