Wall Street tumbles; Dow down 312 points

In the US markets, stocks closed with substantial losses but the extent of the fall was far less than what was initially feared. Stocks fell to their session low early on. At that point, the Dow was down 5.8% and the Nasdaq fell 6.9% to a new five-year low. Choppy trading gave way to a late session rally that helped stocks finish off their lows. The losses were tempered when existing home sales numbers came in better than expected.

Dow plunged 312.30 points, or 3.59%, to 8,378.95. The S&P 500 index slipped 31.34 points, or 3.45%, to 876.77, and the Nasdaq composite index lost 51.88 points, or 3.23%, to 1,552.03.

Experts react on the global turmoil:

Robert Doll, VC, BlackRock said “Redemption will continue. Redemptions historically have happened after periods of big decline and it will last for some time even on rallies. So we should plan for those redemptions to continue. There is a lot of emotion in this market. You all have seen covering and a lot of forced selling. We think that there are three reasons for this selling. First, the credit related issues are slowly but surely improving and the markets are beginning to operate on the credit side a lilttle better. The second reason is the emerging recessionary fears; the economy in the US seems to have hit a brick wall and fall off the cliff after the Labor Day, and that’s echoing around the world. So, we are trying to figure out how low those earnings will go. But, the third reason is as a result of the first two and that forces selling from the leveraged and redeemed. So as investors you step back and say I am getting enough quality in my portfolio and this is the day when I will prefer to be a buyer than a seller.”



Bill Gross, Founder and CIO, Pimco said, “This is a secular deleveraging and it has never occurred before or at least it has not occurred since the 1930s. It will carry its implications for the corporate profits, margins and ultimately for a significant delevraging system, not just in US, but globally. What is really happening is that the private sector is deleveraging and is being substitute with a wallet and a check by the US treasury and the Fed and till the extent that process isn’t erupted, it had been simple because the programmes have not been put into place yet, then the forces selling and the margin call so to speak can continue below levels that are justified. The insurance companies yesterday were talking to FDI of buying homes, so now almost every asset in addition to the auto companies and their particular problems are available to the purchase by the government. This suggests that there is a substantial shift from the private to the public sector that will carry problems with this for years, but hopefully we will get out of these things at is stabilizes.”



Richard Bernstein, Merrill Lynch Global Wealth Management said, “We are still very big fans of the developed markets over the emerging markets. The US and Japan are the two economies that have benefited the least from the credit bubble and I don’t believe that people realise that a lot of emerging markets benefited tremendously from the credit bubble.”



Davis Darst, Merrill Lynch Global Wealth Management said, “It is C+C equals C, capital + credence equals confidence and we don’t have the credence yet, the candor and the candidness about the revelation and nobody trusts anything and that is what we need. We have got the capital but we don’t have the other Cs and we tell the young people, who are looking for jobs at the Wall Street, that it is either Shanghai, Mumbai, Dubai or goodbye.”



Robert Mundell, Columbia University Professor said, “The important thing is to get people to start buying and holding their houses. The main way to do that is to keep the real economy from running not necessarily only the housing, but the other non-housing part of the economy too. And I think the focus needs to be put on that, because it looks as if this liquidity crisis and the bank crisis is spilling over into the real economy and we are threatened with something that is a serious downturn recession.”