Update: Markets stabilize for now after emergency rate cut

[JTD]

Sell-offs always seem to accelerate the last hour of trading. This sell off was sparked by a french bank freezing U.S. Credit market assets. The article is here. Reading the article, I get the sense that we have some very bad news at play here.

Dow Plunges 387 on Following Renewed Subprime Mortgage Concerns


NEW YORK (AP) -- Wall Street plunged again Thursday after a French bank said it was freezing three funds that invested in U.S. subprime mortgages because it was unable to properly value their assets. The Dow Jones industrials extended its series of triple-digit swings, this time falling more than 380 points.
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The announcement by BNP Paribas raised the specter of a widening impact of U.S. credit market problems. The idea that anyone -- institutions, investors, companies, individuals -- can't get money when they need it unnerved a stock market that has suffered through weeks of volatility triggered by concerns about tight credit and bad subprime mortgages.

A move by the European Central Bank to provide more cash to money markets intensified Wall Street's angst. Although the bank's loan of more than $130 billion in overnight funds to banks at a low rate of 4 percent was intended to calm investors, Wall Street saw it as confirmation of the credit markets' problems. It was the ECB's biggest injection ever.

The Federal Reserve added a larger-than-normal $24 billion in temporary reserves to the U.S. banking system.

[kevin]

The hard times will come soon enough. I personally cannot wait until there is a run on the banks.

[artist]

could you post a link, please?

[Regit]

Here's the link:

http://abcnews.go.com/Business/wireStory?id=3463614

Anyway, no big deal yet. But something probably will have to be done soon about subprime mortgages.

[artist]

Thanks Regit.

I just love the gloom and dooms days prediction. Let's see where we are a year from now.

[Brent]

It dropped 2.8%. In the mini-crash of 1987 it dropped 22.3%. Clearly, there is no reason to panic or freak out or anything.

[wx247]

Today doesn't look good either. I would expect today and Monday to be volatile, too, because the uncertainty that a weekend brings.

[Brent]

Once again, the day started up and then it plunged significantly in the final hour. Down just short of 175 to close BELOW 13,000. Has fallen over 1,000 points since the all-time high above 14,000 4 weeks ago.

http://www.msnbc.msn.com/id/3683270/

[artist]

which went up entirely too fast. I am not surprised it fell today with the 2 storms out there.

[JTD]

Once again, the day started up and then it plunged significantly in the final hour. Down just short of 175 to close BELOW 13,000. Has fallen over 1,000 points since the all-time high above 14,000 4 weeks ago.

http://www.msnbc.msn.com/id/3683270/

Yes, significant market correction going on here for sure.

The fundamentals appear strong, however, but then again the fundamentals appeared strong in 2000/2001 for the crash back then as well.

[RL3AO]

I'm not worried. Just a correction IMO.

[DanKellFla]

The fundamentals appear OK, but the subprime mess is going to get worse before it gets better. The Fed needs to keep the retail economy moving. We need to buy refridgerators, cars, and clock radios or things could get bad. Greedy mortgage brokers, greedy banks and duped a lot of people into getting into this mess. Just wait until October when more adjustable rate mortgages adjust. People will suddenly have to pay double what they were paying. Crazy days are ahead, but I don't think it will be as bad as 87.

[Stephanie]

The fundamentals appear OK, but the subprime mess is going to get worse before it gets better. The Fed needs to keep the retail economy moving. We need to buy refridgerators, cars, and clock radios or things could get bad. Greedy mortgage brokers, greedy banks and duped a lot of people into getting into this mess. Just wait until October when more adjustable rate mortgages adjust. People will suddenly have to pay double what they were paying. Crazy days are ahead, but I don't think it will be as bad as 87.

The subprime loans helped the real estate market chug along. Unfortunately, we have to pay the price for it.

[DanKellFla]

The subprime loans helped the real estate market chug along. Unfortunately, we have to pay the price for it.

The longer the party, the bigger the hangover.

The point to ponder is how to react now. Should the government come in with a bailout, or should we sit back and suffer the consequences? Just look at what happened with the Savings & Loan bailout in the late 80s. The Feds came in and bailed that out. We paid for that before, but was it worth it? Depending on which economist you refer to, some say yes, and some say no.
This is so complicated. I have learned some very painful lessons the last few months. But one great example of how we got into this mess is how Mortgage Brokers got compensated. For example: A couple qualifies for three loans. On one loan, he gets $500, on the second $1000, and on the third $10,000. Which one is the broker going to recomend? It also happens to be the one that adjusts to some obscene rate in 5 years. The broker says," Oh, you will refinance by then anyways, just sign here." Now we are in a mess.

[JTD]

Worldwide stocks continue to slide:

AP
Stocks Extend Slide on Countrywide News
Thursday August 16, 10:28 am ET
By Joe Bel Bruno, AP Business Writer
Wall Street Extends Retreat As Mortgage, Credit Concerns Remain; Countrywide Taps Credit


NEW YORK (AP) -- Stocks fell sharply Thursday after investors were shaken by problems at Countrywide Financial Corp. that confirmed fears of widening credit problems and after the Federal Reserve injected $17 billion of liquidity into the banking system. The Dow Jones industrial average fell 130 points.
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Investors' confidence, already diminished by months of bad news about mortgages and credit, took a further drubbing after Countrywide, the nation's largest mortgage lender said it was forced to draw on an $11.5 billion credit line to fund operations.

And, Wall Street seemed unfazed as the New York Fed -- which carries out the central bank's market operation -- announced an overnight repurchase agreement worth $12 billion. This was on top of a 14-day "repo" worth $5 billion announced before the market opened.

Central banks around the world have been supplying billions of funds to banks in the past week to make cash available for lending and keep interest rates from rising amid signs that credit was drying up. The Fed uses a repo to buy securities from dealers, who then deposit the money into commercial banks.

Investors' anxiety still prompted them to sell. The decline on Thursday extended weeks of volatility over credit and debt concerns that showed no signs of abating. And, a sell-off overseas offered Wall Street little reason to try to stanch the bleeding a day after the Dow closed below the 13,000 mark for the first time since April and the Standard & Poor's 500 index moved into negative territory for the year.

In the first hour of trading, the Dow tumbled 130.96, or 1.02 percent, to 12,730.51.

Broader stock indicators also skidded. The Standard & Poor's 500 index was down 14.08, or 1.00 percent, at 1,392.62, and the Nasdaq composite index dropped 21.53, or 0.88 percent, to 2,437.30.

[JTD]

Down 240 points now

Stock markets in freefall

[JTD]

NEW YORK (AP) - The Dow Jones industrial average plunged more than 300 points today. The drop in stock prices, extending an almost relentless downward spiral after problems at Countrywide Financial Corp. confirmed investors' fears that credit problems are spreading. The market shrugged off the Federal Reserve's injection of $17 billion into the banking system.
In early afternoon trading, the Dow tumbled 308.41, or 2.40 percent, to 12,553.06. The S&P shed 32.54, or 2.31 percent, to 1,374.16, and the Nasdaq composite index dropped 66.27, or 2.70 percent, to 2,392.56. The Russell 2000 index of smaller companies fell 13.47, or 1.79 percent, to 738.07.

Investors' confidence, already diminished by months of bad news about mortgages and credit, took a further pummeling after Countrywide, the nation's largest mortgage lender, said it was

[Brent]

It has come up dramatically, only down about 70 now.

[DanKellFla]

The Feds pumped 17 billion in short term loans.

[Stephanie]

Countrywide is who holds the mortgage to our home.