Wall St Pummelled As Credit, Economic Worries Resurface

Source : The Straits Times, Nov 2, 2007

NEW YORK - WALL Street took a tumble on Thursday as fresh concerns about the United States economy, corporate earnings and tight credit conditions prompted a sharp reversal from a rally a day earlier fuelled by a US rate cut.

The latest selloff came after a rout in European shares hurt by high oil prices and worries about the financial sector's hit from a global credit squeeze.

The Dow Jones Industrial Average slid 362.14 points, or 2.60 per cent, to close at 13,567.87, more than erasing the gains from a rally in the prior session.

The Nasdaq composite sank 64.29 points, or 2.25 per cent, to 2,794.83 and the Standard & Poor's 500 plummeted 40.94 points, 2.66 per cent, to end at 1,508.44.

The market action came as oil giant ExxonMobil missed Wall Street profit expectations and analysts at CIBC World Markets downgraded Citigroup, saying the banking sector leader needs to raise US$30 billion (S$44 billion) in capital over the near-term.

Also on Thursday, the Federal Reserve injected US$41 billion in temporary reserves into the US money markets to help ease ailing credit markets.

Mr Patrick O'Hare at Briefing.com said the Citigroup downgrade, highlighting the woes of the finance sector, 'can clearly be identified as a market-moving catalyst'. The banking giant's shares were down nearly seven per cent at the close.

Some said Citigroup's woes following a massive third quarter loss at Merrill Lynch underscored concerns that the financial sector will feel more pain from the housing crisis and its spillover.

;The downgrade of Citigroup today was a stark reminder that the full extent of exposure to the loan problems may not be known,' said Mr Gregory Drahuschak at Janney Montgomery Scott.

'The market hates this kind of uncertainty. This probably assures that volatility will remain high.'

The market opened lower as crude oil prices surged above US$96 a barrel for the first time.

Crude prices later retreated but the stock market worsened after Chrysler announced a new reorganisation plan with thousands of job cuts in the face of a 'smaller' market for vehicles. -- AFP