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Industrials Drop 680 After Late Collapse

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Industrials Drop 680 After Late Collapse

The stock market’s collapse accelerated Thursday as bank lending remained stubbornly clogged and investors remained unwilling to hold anything except cash and government debt, no matter how tiny the returns for doing so.
The Dow Jones Industrial Average declined for a seventh straight day, plunging 678.91 points, or 7.3%, to 8579.19. Blue chips last dipped below the 9000 level five years ago. Thursday’s fall was the Dow’s third-worst all time in point terms and 11th worst in percentage terms. During its recent losing run, blue chips have fallen by a startling 20.9% and are down 39.4% from their record high, which was hit exactly one year ago.
New D-Day for the Dow
Investors will remember Oct. 9, when the Dow peaked above 14,000 in 2007 and then closed 40% lower 12 months later. MarketWatch’s editor in chief Dave Callaway reports. (Oct. 9)
Translating the day’s losses into dollar terms, the Dow Jones Wilshire 5000, a proxy for the total U.S. stock market, lost 2 billion in market capitalization on Thursday, .5 trillion over the last seven trading sessions, and .3 trillion since the all-time high it hit last October.
"This is indiscriminate selling," said trader Todd Salamone, of Schaeffer’s Investment Research, an analysis and asset-management firm in Cincinnati. "Not until there are massive improvements in the credit markets are we likely to see this really end."
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Among the Dow’s components, General Motors shares plunged 31% after the auto maker’s credit ratings and those of its financing unit were put on watch for downgrade by Standard & Poor’s. The Dow’s financial components suffered as well, with Citigroup dropping 10% and Bank of America falling 11.2%. Exxon Mobil shares fell 11.7% after the front-month crude-oil futures contract settled at .59, the lowest settlement since Oct. 23, 2007. Investors worry economic aftershocks from the credit crisis will curb demand for fuel.
Investors are generally skeptical that the vast sums of government money that are being pumped into the financial system will do much to unfreeze the credit markets. Economists fear that with companies frozen out of short-term funding sources, a severe recession could result. Markets are beginning to price in such a scenario, analysts say.
"Every single business in the world needs working capital," said strategist Doug Peta, of the New York portfolio-management firm J. & W. Seligman & Co. "You need to spend money to make something before you can sell it, which is what generates your profits, which is what drives the stock market. That’s why the stress in short-term funding is the crux of the market’s problem right now."
According to data from the British Bankers’ Association, overnight U.S. dollar Libor fell slightly compared to Wednesday’s fixing. But longer-term funding pressures tightened. The key three-month Libor rate rose to 4.75% from 4.52%.
Those rates are key to setting the prices of credit that banks charge their clients, including companies whose activities drive growth in the broader economy.
Other major stock yardsticks plunged. The Nasdaq Composite Index fell 5.5% to 1645.12. The small-stock Russell 2000 tumbled 8.7% to 499.20. The S&P 500 shed 7.6% to close at 909.92. All of its sectors posted big losses, ranging from a 3.3% drop in technology to a 14.4% slide in energy. The S&P financials were off 10.4%.
Strategist Jim Paulsen, of Wells Capital Management in Minneapolis, said the fear that has seized the market lately may be an unintended, self-fulfilling consequence of recent efforts in Washington to pass a 0 billion rescue of firms saddled with illiquid mortgage securities.
"To sell the bailout to the public, everyone from the President on down had to go out and tell people how bad everything was, that the world was coming to an end," said Mr. Paulsen. "Ever since, people’s expectations about the economy have gotten worse and worse and worse, and their reaction to each new action to fix the problems has gotten worse and worse and worse."
Wall Street’s few remaining giants suffered deep share declines on Thursday. Morgan Stanley, which along with rival Goldman Sachs Group abandoned the independent brokerage model a few weeks ago to convert itself into a deposit-taking institution, plunged 26%. Merrill Lynch, which has agreed to be sold to Bank of America, also dropped 26%. Goldman shares were down 10%.
Another company highly dependent on free-flowing credit markets — student-loan giant SLM — declined 19%. Asset manager Legg Mason plunged 25% and bond insurer Ambac Financial Group fell 29%. Insurer Prudential Financial fell 23%. With so many companies experiencing such steep skids, the market’s fear gauges leapt. The Chicago Board Options Exchange Volatility Index soared by 11% to 63.92.
Long-term Treasury prices fell. The 10-year note shed 1-2/32 to yield 3.785%. The 30-year bond was off 1-16/32, yielding 4.121%. The dollar strengthened against major overseas rivals. The euro cost .3654, down from .3667 late Wednesday. One dollar fetched 100.96 yen, up from 99.84 yen.
Peter Cardillo, chief market economist at Avalon Partners, hoped that the 9000 level would hold as a low for the Dow, signaling the crisis of confidence had run its course. Instead, it now appears the bloodletting could continue for days longer, at least.
"It’s getting to a point where it’s every man for himself," said Mr. Cardillo. "When fear reaches that level, you’re getting close to a bottom. But we’re clearly not there quite yet."
—Kevin McKay, Geoffrey Rogow and Rob Curran contributed to this articleWrite to Peter A. McKay at peter.mckay@wsj.com.

Forex is a market, participated in all over the world, where people can trade currencies for other currencies. One common scenario is that an American Forex trader has bought a few thousand yen in the past, but now sees the yen is losing value relative to the dollar. If they are correct, and trade their yen for the American dollar, they could make a profit.

The forex market can be quite addicting to a new trader. A majority of traders can give only a few hours of their undivided attention to trading. To avoid burn out, remember to step away from the computer occasionally and clear your mind.

Ignore pay systems like “black box” because they are almost always scams. Instead of explaing their methods, these systems will claim to produce incredible profits that they don’t back up with proof.

Thanks to the internet, you can learn about forex trading anytime you want. It is not until you are familiar with what happens that you are truly prepared for the forex adventure. If you don’t understand something, don’t panic. There are lots of experienced traders online who are happy to share information and help you get started. Just search online for a Forex trading forum where you can give and receive advice.

You need to not only analyze forex but you should try to come up with a good plan. The good news is that by immersing yourself in the fundamentals of the market and the economic and political climate of foreign countries, you can reduce the risk you take while increasing your expected returns.

Don’t expect to reinvent the forex wheel. Forex trading is a complicated system that has experts that study it all year long. You most likely will not find success if you do not follow already proven strategies. Read up on what the established trading methods are, and use those when you’re starting out.

You need to be able to customize your automated trading system. You need to be able to make changes to the system that you are using in order to fit with your strategy. Prior to purchasing your software, make sure that you can customize it.

You can use the relative strength index as a tool to measure the gain or loss in a market. It doesn’t quite display your investment, but does clue you in on the profitability of certain markets. Do your research before you invest, and find profitable markets.

If managed forex accounts are your preferred choice, make sure you exercise caution by investigating the various brokers before you decide on a company. The broker should be experienced as well as successful if you are a new trader.

So you have decided to give forex trading a shot? You should always know in what way foreign currency trading works, as this is most important to your success. Understand how currency markets move and what their causes are. Spend some time looking into all the different foreign currencies that get traded on the market. The more you learn about foreign currencies and can educate yourself on the how the market works, the better your chances will be to be successful in forex trading.

It is important that you vary the type of analysis you use on the Forex market. The 3 different types of analysis you should be familiar with are sentimental, technical and fundamental. If you do not explore all of your options you may be cheating yourself. You should use more kinds of analysis as you are moving forward with Forex trading.

The most big business in the world is forex. It is in the best interest of investors to keep up with the global market and global currency. The average trader, however, may not be able to rely on their own skills to make safe speculations about foreign currencies.

Category: Forex Trading