Dow drops for second day

November 07, 2008|By Los Angeles Times

NEW YORK - The stock market endured its second thrashing in two days yesterday, as dismal retail sales raised concern that a global recession could be longer and deeper than thought likely even a few weeks ago.

The Dow Jones industrial average sagged almost 450 points in a virtual replay of Tuesday's 486-point drop, and investors braced for potentially more losses today when the government releases its closely watched monthly unemployment report.

"Over the last couple days, now that the election is behind us, it appears that the equity market is seeing even more negative earnings and economic issues on the horizon, and an even more severe and prolonged downturn than previously anticipated," said Richard Weiss, chief investment officer at City National Bank in Beverly Hills, Calif.

The sell-off illustrated the extent to which fear is gripping the markets.

Retail sales were widely expected to be weak in October, when the fallout from the housing collapse and credit crisis dominated the markets and the presidential campaign. Yet share prices were pounded anyway.

"We've got markets trading on raw and pure emotion," said Jim Paulsen, chief investment strategist of Wells Capital Management.

The market is being hurt by a steady drip of bad news as companies rein in earnings estimates almost daily.

Technology stocks got hit after networking giant Cisco Systems Inc., considered a bellwether for overall industry demand, forecast late Wednesday that sales would decline as much as 10 percent in its fiscal second quarter.

The specter of continuing layoffs is haunting the market.

Initial claims for unemployment benefits ticked slightly lower last week - dropping 4,000 to 481,000, according to the Labor Department - but remained well above the 400,000 mark that historically accompanies recessions. Long-term claims reached their highest mark in 25 years.

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