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Thursday, October 9, 2008

Wall Street Wilts- Down almost 400 to under 9000

NEW YORK ( -- Stocks slumped Thursday afternoon - with the Dow falling below 9,000 - as the Treasury's eye on buying stakes in struggling banks failed to reassure investors amid the ongoing credit crisis.

Bank lending remained tight as nervous institutions continued to hoard cash. Treasury prices fell, raising their corresponding yields. The dollar gained versus the euro and the yen. Oil and gold prices fell.

With under an hour left in the session, the Dow Jones industrial average (INDU) had lost 255 points, or 2.8%, after hitting its lowest point since July 1, 2003. The Standard & Poor's 500 (SPX) index lost 2.5%. The Nasdaq composite (COMP) lost 1.4%.

All three major gauges were flirting with fresh five-year lows.

After seesawing through the morning, stocks turned lower in the afternoon, extending the recent slide. The Dow lost nearly 1600 points in the previous six sessions on growing skepticism that the financial markets can be stabilized.

Investors are trying to get accustomed to the new realities of the market, but aren't able to just yet, despite all the government actions, said Gary Webb, CEO at Webb Financial Group.

"What the Fed has done is eventually going to help turn things around, but people don't believe it yet," Webb said. "They're acting on fear."

Stocks fell Wednesday on pessimism about the economic outlook, despite an emergency rate cut from the Federal Reserve that was coordinated with central banks around the world.

The surprise cut was the latest step taken by the government over the past week in an attempt to unfreeze the credit markets and get banks to start lending to each other again. The lack of available capital has made it harder for businesses to function on a daily basis and for consumers to get loans, exacerbating the financial crisis.

On Thursday, the Treasury Department said it was actively looking at buying stakes in some of the country's banks, confirming earlier reports. The move would be made under the $700 billion bank bailout law enacted last week. The main focus of the bailout remains buying bad assets from banks. (Full story)

A better-than-expected earnings report from IBM had lifted the technology sector through the early afternoon. But any tech advance got washed out in the afternoon selloff. Oil services stocks declined along with oil prices. Shares of General Motors (GM, Fortune 500) and Ford Motor (F, Fortune 500) fell after a report said auto sales will hit recession levels this year and sink lower next year. (Full story)

On the economic front, weekly jobless claims edged off a seven-year high, but still outpaced forecasts. (Full story)

To put in perspective just how hard the stock market has been hit over the last 12 months: a year ago today the Dow closed at an all-time high of 14,164.53. As of Wednesday's close, it has lost 33%.