Stocks end worst week mixed after wild session

NEW YORK - Wall Street capped one of its worst weeks ever with a wild session Friday that saw the Dow Jones industrials gyrate within a 1,000 point range before closing with a relatively mild loss and the Nasdaq composite index actually ending with a modest advance. Investors were still agonizing over frozen credit markets, but seven days of massive losses and the possibility of further government support for the markets tempted some investors late in the session.

The Dow lost 128 points, giving the blue chips an eight-day loss of just under 2,400, or 22.1 percent. The average had its worst week on record in both point and percentage terms. The Standard & Poor's 500 index, the indicator most watched by market professionals, posted its worst weekly run since 1933.

The latest loss also means the Dow is down 40.3 percent since reaching a record high close of 14,164.53 a year ago, on Oct. 9, 2007. The S&P 500, which reached its high of 1,565.15 the same day, is down 42.5 percent.

Investors suffered a paper loss for the day of about $100 billion, as measured by the Dow Jones Wilshire 5000 index. For the week, investors lost $2.4 trillion, and over the past year, the losses have piled up to $8.4 trillion.

But there were signs Friday that some investors believe the market is near a bottom. On Thursday, selling accelerated in the last hour of trading. The Dow was down 221 points at 3 p.m. but closed down 679 points an hour later. On Friday, the Dow was down 468 points at 3 but rocketed 790 points and was up 322 points just after 3:30. It then sold off but closed down only 128.

And the Russell 2000 index, which tracks the movements of smaller company stocks, had a 4.66 percent gain Friday; small-cap stocks are often first on investors' shopping lists when they think a market turnaround is at hand.

"Nobody wants to miss the bottom," said Anton Schutz, president of Mendon Capital Advisors, who said of the Dow's performance, "I view it as a victory that we only finished down 100."

Some investors may have been placing bets ahead of the weekend meeting of officials from the Group of Seven nations, who gathered in Washington to discuss the economic meltdown. One of the potential remedies expected to be reviewed at the meeting is for governments to guarantee lending among banks.

"Everyone is hoping for really good news that can invigorate some buying and break this credit freeze, but your guess is as good as mine as to whether that will happen. I think people are desperate for action," said Jon Biele, head of capital markets at Cowen & Co. "It truly is remarkable to watch what's happening."

Still, Friday's widely mixed finish was proof that Wall Street still has a long list of troubles, and trading is likely to remain volatile when the market reopens on Monday.

"This kind of volatility in the market tells you that there are huge disagreements among investors about what the fundamentals are, about what the outlook is," said Ethan Harris, managing director and chief U.S. economist at Barclays PLC.

The hair-trigger mentality of the market — a reflection of the intense anxiety on the Street — was evident from the opening bell. The Dow fell 696 points in the first 15 minutes, recovered to gain more than 100 before that first hour was over and then turned sharply lower again. It spent much of the session with a deficit between 300 points and 500 points, regaining some ground and then falling again — until the last hour, when the average had swings spanning hundreds of points that took the Dow up as much as 322.

Investors have shuddered the past month over a credit market that remains frozen, posing a threat to the economy by making it harder and costlier for businesses and consumers to get a loan. But Friday's gainers included financial stocks, the ones most decimated by the credit crisis.
Harris said policymakers likely will continue to do what is needed to revive the credit markets. Actions taken so far by central banks, among them the Federal Reserve, have included increased lending and interest rate cuts.

"The deeper problem is not the stock market drop but the freezing up of the credit markets and that's the root problem and they have to keep applying the antifreeze until it works," Harris said.

The major indexes' sharp swings Friday were likely exacerbated by the computer-driven "buy" and "sell" orders that kicked in when prices fell far enough.

"Fear has been running rampant all over the Street. Fear and greed, that's what rules the Street. I think the carcass has been stripped to the bone," said Dave Henderson, a floor trader on the New York Stock Exchange for Raven Securities Corp. "The mood, it swings with the market. When we went positive, the euphoria down there was awesome. It's like at a football game."

The Dow fell 128.00, or 1.49 percent, to 8,451.49. At its low point Friday, the Dow was down 696.68 at 7,882.51, some 600 points above its low in Wall Street's last bear market, 7,286.27, reached Oct. 9, 2002. It crossed the line between gains and losses 32 times during the session.
Its close was the lowest since April 25, 2003.

Market index stats again told how horrific the run has been on Wall Street:

• The Dow lost 1,874.19 points, or 18.2 percent, during the week. Its dismal performance outdid the week that ended July 22, 1933, which saw a 17 percent drop — and back then, during the Great Depression, there were six trading days in a week.

• The Dow has fallen for eight straight sessions — the longest losing streak since the eight days of declines following the Sept. 11, 2001, terror attacks, when the blue chips lost 1,038.12, or 10.8 percent.

• It's been the worst run for the Dow since the nearly two-year bear market that ended in December 1974 when the Dow lost 45 percent.

• Since hitting their record highs a year ago, the Dow has lost 5,713 points, or 40.3 percent, while the S&P 500 is off 665.90 points, or 42.5 percent.

Beyond the Dow, broader stock indicators were mixed Friday.

The S&P 500 index fell 10.70 or 1.18 percent, to 899.22. The 18.2 percent drop for the week was the S&P's steepest decline since the week ending May 21, 1933; its worst loss was in 1929, when it fell 19.9 percent. The index lost 200.01 points for the week.

The Nasdaq composite index rose 4.39, or 0.27 percent, to 1,649.51. For the week, the Nasdaq lost 297.88, or 15.3 percent.

The Russell 2000 rose 23.28, or 4.66 percent, to 522.48. For the week, the Russell fell 96.92, or 15.64 percent.

Decliners led advancers 2-to-1 on the New York Stock Exhange, where consolidated volume came to a record 11.2 billion shares, compared with 8.14 billion traded Thursday.

Most major central banks around the world slashed interest rates this week after continuing problems in the credit market triggered concerns that banks will run out of money. Analysts have described the mood on trading floors this week as panicked at times, with investors bailing out of investments on fears there is no end in sight to the financial carnage.

A stream of selling forced exchanges in Austria, Russia and Indonesia to suspend trading, and those that remained opened were hammered. The rout in Australian markets caused traders there to call it "Black Friday."

European stocks sank Friday, with Britain's FTSE-100 falling 8.85 percent, German's DAX declining 7.01 percent, and France's CAC-40 ending down 7.73 percent. In Asia, the collapse of Japan's Yamato Life Insurance caused already nervous investors to pull even more money out of the market — the Nikkei 225 fell 9.6 percent.

An index considered to be Wall Street's fear gauge reached record highs on Friday in another sign of massive investor anxiety. The Chicago Board Options Exchange Volatility Index, known as the VIX, rose to an all-time intraday high of 76.94 Friday. The VIX, which usually trades under 50, tracks options activity for the companies that make up the S&P 500.

Still, prospects of further government help and, perhaps, attractive prices helped parts of the financial sector show signs of life. Big national banks were among the gainers, including Bank of America Corp., which rose $1.24, or 6.3 percent, to $20.87. Some smaller banks also rose, including Fifth Third Bank Corp., which advanced 67 cents, or 6.9 percent, to $10.40.
Not all financials enjoyed a bounce, however. Morgan Stanley Inc. fell $2.77, or 22 percent, to $9.68 as investors worried that even with a major investment from Japan's Mitsubishi UFJ Financial Group the company was still facing troubles. Meanwhile, Goldman Sachs Group Inc. fell $12.55, or 12 percent, to $88.80.

Financials were most prominent among the stocks that rose in the S&P 500, though technology stocks generally advanced. Apple Inc. rose $8.06, or 9.1 percent, to $96.80, while eBay Inc. rose 77 cents, or 4.8 percent, to $16.73.

Investors appeared unfazed by final results arriving in afternoon trading from an auction Friday that set the price of debt issued by now bankrupt Lehman Brothers Holdings Inc. at 8.625 cents on the dollar, down from a preliminary estimate of 9.75 cents.

The auction was for credit default swaps, which are contracts used to insure against the default of financial instruments like bonds and corporate debt. Traded in a $60 trillion, unregulated market, many of the instruments have fallen sharply because of their ties to bad mortgage debt. Those big losses and nervousness about who holds what CDS has made financial institutions hesitant to lend to one another. The auction could help the market determine which companies are most at risk from CDS losses.

Source: Associated Press

Lehman Storm Sparks Global Stock Markets Purge

Global stocks hammered after Lehman files for Chapter 11
* Investors flee risk; high-grade debt, gold, yen in demand
* Fed, ECB, BoE turn on liquidity taps
* Focus turns to Fed policy


(Updates throughout, adds quotes, update prices)

By Veronica Brown


LONDON, Sept 15 (Reuters) - Global share prices sank on Monday after Lehman Brothers filed for bankruptcy protection, prompting a sharp exit from risk across world financial markets.
The dollar lost traction against the yen, setting the Japanese unit on track for its best daily performance in nearly 2 years, but rallied against other major currencies as deleveraging kicked in.


Reflecting a growing sense of panic, futures markets jumped to price in a near 80-percent chance of a quarter-point cut in Federal Reserve interest rates at its meeting on Tuesday.
U.S. stock market futures fell by between 2.6 and 3.7 percent, pointing to a sharply lower open, while European stocks shed more than 4 percent. Among them, Lehman Brothers shares in Frankfurt tanked 90 percent.


Adding to worries was a report that American International Group Inc, one of the world's largest insurers, had asked the Fed for a $40 billion bridge loan, while the Fed itself said it had expanded its liquidity provision facilities.


European stocks followed their Asian counterparts down after share prices in Australia, Singapore and Taiwan all dropped 3 to 4 percent, while Indian stocks fell 5 percent.
The FTSEurofirst 300 index of top European shares was down 4.5 percent at 1,109.85 points.
Banking stocks led the fallers across Europe, with UBS, HSBC , Royal Bank of Scotland, Societe Generale, BNP Paribas and Credit Agricole trading 7-22 percent lower.


"This is a perfect storm in a perfect storm," said Justin Urquhart Stewart, investment director at 7 Investment Management. "It's a return to pure capitalism, the survival of the fittest -- government can't and won't bail everybody out."


Lehman filed for bankruptcy protection after trying to finance too many risky assets with too little capital, making it the largest and highest-profile casualty of the global credit crunch.
Also in the financial sector, Bank of America Corp agreed to buy Merrill Lynch in an all-stock transaction that Bank of America said is worth $50 billion.


TIDAL SWELL AGAINST RISK


Turmoil on Wall Street, just a week after the U.S. government bailed out mortgage giants Fannie Mae and Freddie Mac, sparked a wave of risk aversion through all asset classes.
The dollar tumbled more than 3 percent at one point versus the yen. Yen gains were later trimmed after China cut its benchmark interest rates and reserve requirements..
The U.S. currency rallied elsewhere, gaining more than 2 percent versus the high-yielding Australian and New Zealand dollars. It rose to the euro as investors unwound riskier currency plays and repatriated dollars.


"There is a high likelihood that the distress in financial markets and wider evidence of slowing global growth are prompting investors, particularly U.S. investors to repatriate those flows back into the U.S.," said Lee Hardman, currency economist at Bank of Tokyo Mitsubishi-UFJ.
A classic safe-haven, gold, initially jumped 2 percent before paring gains, while U.S. Treasury yields, which fall as prices rise, hit multi-month lows.


Growing unease pushed the cost of borrowing overnight dollar funds up.
The bank-to-bank premium paid for overnight dollar funds was fixed at 3.10625 percent, according to the British Bankers Association's latest daily fixing, up nearly a full percentage point at its highest since late June.


The price of insurance against default on debt soared, with the investment-grade Markit iTraxx Europe index at 124.5 basis points, 21.5 basis points wider than late on Friday.
The Swiss franc and yen, associated with stability in times of stress, strengthened. The dollar was last down roughly 2 percent to 105.87 yen and was down 0.6 percent at 1.1237 Swiss francs.
But the euro fell 0.6 pecent to stand roughly 3 cents down from session highs seen earlier, while sterling also shed 0.6 percent.


FED, ECB, BOE OFFER LIQUIDITY


The Fed said it would begin accepting equities as collateral for emergency loans for the first time -- a step likely to help surviving financial institutions find cash but which may not do much to boost global confidence in the U.S. financial system.


The European Central Bank and Bank of England both announced fine-tuning operations, signalling they were prepared to open the funding taps to try and ease money market tension.
In addition, 10 of the world's biggest banks agreed to establish a $70 billion borrowing facility to bolster liquidity.



Source:http://www.guardian.co.uk/business