Wall Street Dives below 13,000 on economic fears

Nov 20, 2007

Wall St dives below 13,000 on economic fears

NEW YORK - WALL Street shares tumbled Monday, dragging the Dow blue-chip index below 13,000 amid growing fears that the US economy is perilously close to recession.

The Dow Jones Industrial Average slid 218.35 points, or 1.66 per cent, to 12,958.44, dropping below the psychological barrier of 13,000.

The Nasdaq composite shed 43.86 points, or 1.66 per cent, to 2,593.38 and the broad market Standard & Poor's 500 index retreated 25.47 points, or 1.75 per cent, to 1,433.27.

The Wall Street rout came amid sharp declines in other global markets, with London's FTSE sliding 2.7 per cent and the Frankfurt Dax down 1.32 per cent.

With no economic news on tap, investors focused on the weak outlook for the US economy as well as a downgrade of US banking giant Citigroup amid concerns that it may have to write off an additional US$15 billion (S$22 billion) in soured mortgage investments.

Some worried that US consumers might retrench during the upcoming holiday season, putting more pressure on a fragile economy.

'All eyes are on the US consumer. A significant consumer retrenchment could spell doom for the current economic expansion,' said economist Scott Anderson at Wells Fargo.

'The list of obstacles for the consumer is long and daunting: falling national home prices, a struggling stock market, a softening labour market, rising energy and food prices, resetting mortgage rates, and high debt levels. Indeed, financial markets have begun to bet that the US consumer will not survive this financial tsunami.'

Mr Marc Pado at Cantor Fitzgerald said the weak dollar also hurt investor sentiment, especially after the Organisation of Petroleum Exporting Countries cartel discussed the notion of ending the pricing of oil in dollar.

'That would clearly damage the dollar,' Mr Pado said. 'So there is a bit of concern regarding the dollar, which is near record lows.'

The finance sector led the decliners: Citigroup slid 5.9 per cent to to US$32.00, pulling down other financial shares: Lehman Brothers fell 2.9 per cent to 60.55 and Merrill Lynch tumbled four per cent to 53.87.

Xerox led the gainers, rising 1.6 per cent to 16.08 after the image and copy giant said its turnaround would allow the company to pay a dividend for the first time in six years. -- AFP