Print

Mail

wiki links

Wall Street struggles in grip of recession fears

A trader works on the floor of the New York Stock Exchange on Friday. Wall Street was roiled by a bleak US jobs report on Friday, with the Dow industrials falling to a 17-month low below 12,000 points as recession fears were heightened. PHOTO: AFP

With economic news getting bleaker by the day and worries growing about credit markets seizing up, Wall Street investors have been scurrying for cover.

The main US indexes have hit their lowest levels in a year and a half as fears about recession have risen and consumers and business are battening down the hatches to ride out an expected economic storm.

The Dow Jones Industrial Average tumbled 3.04 percent for the week to close Friday at 11,893.69, its worst level since October 2006.

The tech-heavy NASDAQ composite slid 2.59 percent to 2,212.49 while the broad-market Standard & Poor's 500 index retreated 2.8 percent to 1,293.37.

The market wallowed in losses as any doubts about a deep crisis in the world's biggest economy were erased by data in the past week. The key was Friday's report showing a loss of 63,000 jobs last month, signaling a sharp deceleration in economic momentum.

Even the White House was unable to put a favorable spin on the news.

US President George W. Bush's top economic adviser, Ed Lazear, did not rule out shrinking economic activity for the current quarter.

"We don't really know whether it will be negative or not," Lazear told reporters. "This quarter will probably be our weakest quarter ... Whether you call that 'a recession' or not is something that we won't know for many months."

Most private economists said the writing was on the wall.

Ethan Harris, economist at Lehman Brothers, said the Federal Reserve's interest rate cuts and US$168 billion economic stimulus passed by Congress will be too late to avert a recession.

"While we are penciling in a very mild recession, it is important to not get hung up on the `recession, no recession' debate," he said. "The more fundamental point is that the economy is likely to experience an extended period of very weak growth, a rising unemployment rate and significant further Fed rate cuts."

The Fed stepped up efforts to shore up the banking system by boosting liquidity in direct credit auctions and repurchase agreements, moves that could pump US$200 billion into markets. But some say that might not be enough to jump-start an ailing economy.

Bonds failed to gain as inflation concerns offset the impact of safe-haven flows. The yield on the 10-year Treasury bond increased to 3.541 percent from 3.534 percent a week earlier, while that on the 30-year bond rose to 4.541 percent from 4.420 percent.
This story has been viewed 1267 times.