The Dow fell 425 points yesterday to close below 8,000 for the first time since 2003 as economic news and worries over the fate of the big three automakers pushed the market lower in the final hour of trading. The selling really heated up in the final minutes and only the bell saved the market from falling flat on its back.
I have mentioned that the real threat of a lower market would be upon us if General Motors (GM, $2.79, down $0.30, Ford Motor (F, $1.26,down $0.42) and Chrysler do not get the $25 billion rescue package they are seaking. The CEOs told lawmakers “that time is running out”, and that if one of them collapsed it would have a disastrous impact on many people and industries.
Although we should have some type of resolution by the end of the week, the market is nervous and Wednesday’s decline only proved that point. The Dow dropped 427 points, or 5%, to 7,997 while the S&P 500 fell 52 points, or 6%, to 806. On a percentage basis, the Nasdaq was hit the hardest, falling 6.5%, or 97 points, to close at 1,386.
All three are rapidly approaching their lows of the 2000 to 2002 bear market and the sell-off in 2008 will go down as one of the largest declines in history if we don’t recover. For the year, the Dow is now down 40%, while the S&P has tanked 45%. The Nasdaq has suffered the worst as technology spending and electronics have slowed causing the index to fall a whopping 48%.
The numbers are insane and they will only get worse if we can’t save GM and Ford.