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NEW YORK - A brutally volatile session on Wall Street ended with relatively modest losses Friday after a meltdown in global markets and wild swings for US indexes.
The Dow Jones Industrial Average saw early losses of as much as 700 points, and two sudden spurts into positive territory before closing down 128 points (1.49 percent) at 8,451.19.
The tech-heavy Nasdaq managed a slim gain of 4.39 points (0.27 percent) to 1,649.51 and the Standard & Poor's 500 index dropped 10.70 points (1.18 percent) to 899.22.
The market saw a stomach-turning ride after some global markets plunged as much as 10 percent. The market ended a vicious week of selling that sent the Dow and S&P indexes tumbling 18 percent.
"Pessimism is rampant," said Gregory Drahuschak at Janney Montgomery Scott.
"Forced selling has been a significant part of the market's drop in the last few days."
"The stock market is playing out a drama that would have left William Shakespeare shaking his head," said Fred Dickson, chief market strategist at DA Davidson & Co.
"We are witnessing one of the biggest and fastest market meltdowns in the last 60 years. We are also seeing an incredibly oversold market continue to emerge although what we need now is for potential buyers who hold plenty of cash, to emerge and collectively begin to take advantage of the distressed market situation," he added.
"Our best guess is that won't happen until the US government steps in and announces that it will guarantee inter-bank lending and the entire 2.2 trillion dollars sitting in demand deposits at US banks."
The action in New York came after Japan's Nikkei plunged 9.6 percent and major European bourses slid amid heightened worries about a seizing up of the global financial system.
The London FTSE 100 index of leading shares fell 8.85 percent to finish at 3,932.06, its sharpest daily plunge since the 1987 stock market crash.
In Paris the CAC 40 lost 7.73 percent to finish at 3,176.49 while the Frankfurt Dax shed 7.01 percent to end the week at 4,544.31.
"If you could measure the overall confidence level of investors, it would likely be so low that it would frighten the rest of the longs out of the market," said Kevin Giddis at Morgan Keegan.
"This is the scary part of the movie where the slasher is hiding in the shadows around the corner waiting to pounce."
Barry Ritholtz at Ritholtz Research & Analytics said the markets have failed to respond to a US rescue package of 700 billion dollars and other steps to pump up liquidity.
"Why are markets reacting so negatively to a near trillion-dollar bailout? The short answer is that the Federal Reserve and the Treasury Department have been focusing on the wrong issues," he said.
"They have been treating falling asset prices -- houses, stocks, bonds -- as well as the lack of confidence between banks, as the actual issue. This is the wrong approach. Falling asset prices and a lack of confidence are a result of the underlying problem. You don't cure alcoholism by getting rid of a hangover. You cannot resolve confidence issues by merely cutting rates."
Among key stocks, Morgan Stanley came under heavy pressure, sliding 22 percent to 9.68 dollars after Moody's warned of a possible credit downgrade for the Wall Street giant despite a big investment from Mitsubishi UFJ Financial Group (MUFG) of Japan.
Citigroup rallied 9.13 percent to 14.11 dollars after throwing in the towel on its plans to buy rival bank Wachovia, but pledging to press its lawsuit for 60 billion dollars for breach of contract. Wachovia leapt 43 percent to 5.15 as it prepared to merge with Wells Fargo, up 3.89 percent at 28.31 dollars.
Among big decliners, ExxonMobil fell 8.3 percent to 63.36 dollars after crude oil futures fell as low as 74 dollars a barrel.
Bonds failed to get a lift from the stock plunge. The yield on the 10-year US Treasury bond increased to 3.861 percent from 3.834 percent Thursday while that on the 30-year bond edged up to 4.137 percent against 4.120 percent. Bond yields and prices move in opposite directions.
- AFP /ls
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