300 Points Lost on Wall Street As Investors Fear
Recession
Stock markets moved lower on
Friday around the world, as investors are liquidating risky
positions, mounting evidence of global recession.
U.S stock indexes fell 4 percent, European stocks fell
6.5 percent and Japan's Nikkei plunged 9.6 percent.
Oil moved lower as well to $63 per barrel while
commodities copper to zinc, sugar and coffee were battered by sharp
selling.
The gloomy outlook convinced investors that economy is
headed for a severe recession despite government efforts to help
financial system. Investors have been saying that we are in
recession and this is time to realize that we are in recession right
now.
With more fear on Wall Street, Hedge Funds have been
pulling their portfolios out of the market and reducing risk and
rise cash, a process known as deleveraging that only intensifies the
selling.
A small comfort came from The National Association of
Realtors which said that sales of existing homes rose by 5.5 percent
in September compared to August. The median sales price has dropped
to $191,600, down by 9 percent from a year ago.
A huge decline in margin calls occurred and everyone
from investors, mutual funds and hedge funds are cashing out. A
margin call occurs when a broker tells an investor to deposit more
money into his account because the securities he bough with borrowed
money fell sharply to a certain point. When that happens, investors
need to raise cash with most likely selling stocks to get cash.
Fear on Wall Street proves that we are oversold. There
is an endless supply of things out there regardless of price. There
are signs that credit market is improving, but more slowly than
anyone can expect. The rate on three-month loans in dollars, known
as the London Interbank Offered Rate, or Libor, fell to 3.52 percent
from 3.54 percent on Thursday.
The mortgage rates have moved lower proved that
government was on the right track to fix financial sector. The yield
on the benchmark 10-year Treasury note fell to 3.64 from 3.66
percent late Thursday.
The deep gloom over global economy is putting
economies and currencies under extreme pressure. Investors are
pulling money out of countries in Eastern Europe, Latin America and
Asia.
A fear if unknown in driving market into volatile
negative territory. Once the hedge fund situation unwinds, we will
have a better picture how deep the recession will be.
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