USA: Wall Street has worst day since markets reopened after the September 11 attacks

Record ID: 737683

  • Title: USA: Wall Street has worst day since markets reopened after the September 11 attacks
  • Date: 16th September 2008
  • Summary: EXTERIOR OF MERRILL LYNCH AND SIGN
  • Embargoed: 1st October 2008 13:00
  • Keywords:
  • Location: Usa
  • Country: USA
  • Topics: Finance
  • Reuters ID: LVADVZ53B0KNHOJF337W9SGLLVVC
  • Story Text: Wall Street had its worst day since markets reopened after the September 11 attacks on Monday (September 15) as fears about the U.S.
    financial system's stability surged after Lehman Brothers filed for bankruptcy and insurer AIG struggled for survival.
    The day followed one of Wall Street's most agonizing weekends ever, which saw the demise of Lehman Brothers and forced Merrill Lynch to accept a takeover by Bank of America Corp.
    But Sunday's (September 14) barrage of shocking news was no exorcism for anxious investors and traders. As concerns about AIG's scramble for capital mounted, the Wall Street Journal reported that the U.S. government has asked Goldman Sachs and JPMorgan Chase to lead a lending facility of $70 billion to $75 billion for the insurer.
    Financial services companies' shares led a broad and steep decline in major indexes as investors worried about the impact of the latest twists in the credit crisis on the economy and the outlook for profits.
    The benchmark Standard & Poor's 500 index fell 59.00 points, or 71 percent, to 1,192.70 -- posting its biggest drop since the day that markets reopened after the September 11 attacks in 2001.
    The S&P 500 also tumbled to its lowest close since October 2005, taking out a key technical support level as it fell.
    The Dow Jones industrial average slid 504.48 points, or 4.42 percent, to 10,917.51 -- its biggest one-day point drop since September 2001.
    The Nasdaq Composite Index dropped 81.36 points, or 3.60 percent, to 2,179.91.
    Lehman, weighed down by losses spawned by the U.S. mortgage crisis, sought bankruptcy protection on Monday following a scramble over the weekend in which it failed to find a buyer.
    Merrill Lynch, meanwhile, agreed to be bought by Bank of America Corp, the No. 2 U.S. bank. Merrill's stock closed just 0.1 percent higher at $17.06, but Bank of America's shares dropped 21.3 percent to $26.55.
    During a news conference, John Thain, CEO of Merrill Lynch, praised the quick action taken by both Merrill Lynch and Bank of America. He said, "The expectation for the difficulties in the marketplace following the Lehman bankruptcy really led us to start to think about what types of transactions might make sense for us and although this will sound very short -- actually the first conversations began Saturday morning -- and the fact that we could put this transaction together basically in forty-eight hours, I think is a great statement on the strengths of both of our teams but also the great strategic fit, which, from the instant we talked was very, very clear that this transaction made a lot of sense."
    Shares of Wall Street firms such as Goldman Sachs and Morgan Stanley also slid on concerns about the viability of their business models, which are similar to those of Lehman Brothers and Bear Stearns, analysts said. Goldman Sachs shares fell 12.1 percent to $135.50, while Morgan Stanley shares dropped 5 percent to $32.19.
    The concern was heightened due to the U.S. government's decision not to provide guarantees for any deal to help Lehman avert bankruptcy.
    People who work on Wall Street were stunned by all of the disastrous news.
    Frank Dimarzio, a Citigroup employee, said, "It was a shock, you think you have the brightest people on the boards. A lot of these people made bad bets in the mortgage business. When the money was flowing everyone was happy and they made bad bets and they lost and it's part of the market."
    Nathan Spiegel said, "The question is, how is it going to affect the mom and pops? And I'm worried about the people that are going to lose their jobs. I mean, you know all the Lehman employees, now they're going to be out of jobs, I don't know how many at Merrill but, you've got to think about that and stop thinking about, good for them, they got their come-uppance.
    There's a lot of people out there that are going to be out of jobs."
    Samiur Rahman said, "Is there more coming? Probably, but I don't think it's going to be, I don't think JP Morgan or Goldman or any one of those guys are going down. They seem to be pretty financially secure. But is there more coming? Probably, I just don't know from where. It's going to be something else that's going to hit us, who knows?"
    There was a bright spot on Monday, A sharp slide in oil prices to below $100 a barrel helped cap the stock market's losses a bit by boosting airlines and retailers, which are particularly sensitive to higher fuel costs, analysts said. U.S. crude fell $5.47 to settle at $95.71 a barrel on the New York Mercantile Exchange.
    Ira Eckstein, the President of Area International Trading Corporation, said the slide in oil prices could be attributed to little damage caused by Hurricane Ike, an overall slowing economy, and falling demand. He said, "I think the trend last week, before the real hurricane made its descent towards the West was the markets was going down, ya know, it already broke one hundred Friday and it would have been down at these levels anyway. The second part, Lehman and the financials, and the money getting tighter and the economy slowing down does have an effect, but I really do think the momentum was heading down and we would have been at these levels if it wasn't for the hurricane last week."
    The S&P energy index lost 6.9 percent.
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