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Thursday, October 16, 2008

The Black Wednesday after 1987 Crash

DJ UPDATE: Stks Slide; S&P 500 Loses Most Since Black Monday '87

Wed Oct 15 17:44:34 2008

(Updates with market data in the second paragraph and further company
information beginning in the fifth paragraph.)

By Rob Curran

NEW YORK (Dow Jones)--The 2008 stock-market crash resumed on a Black
Wednesday with the Standard & Poor's 500 suffering its biggest percentage loss
since Black Monday, Oct. 19, 1987. This time, everything from retail-sales data
to a warning from mining giant Rio Tinto to a statement from Federal Reserve
Chairman Ben Bernanke indicated the bank rescue would not prevent a potentially
deep and widespread recession.

The broad S&P 500 index fell 90.17, or 9.03%, to 907.84, its biggest
percentage loss since the 20% decline on Oct. 19, 1987. The Dow Jones
Industrial Average fell 733.08 points, or 7.87%, to 8577.91 for its biggest
percentage loss since Oct. 26, 1987. The Dow trimmed its gains to 1.5% on a
week that started with a "Green Monday" - the biggest point gain ever for the
Dow. After its second biggest point loss ever, the Dow is off 39% from its peak
last October. The technology-oriented Nasdaq Composite fell 150.68, or 8.47%,
to 1628.33, and is now down 1.3% for the week for its lowest close since 2003.

Traders dumped stocks and commodities most tied to economic growth and
consumer spending after U.S. retail sales took the sharpest drop in three years
during September, a reflection of nervousness about job and financial markets.

In one sign of the extent of a global slowdown, mining giant Rio Tinto said
it would reassess expansion spending plans and curtail production of aluminum,
a key economic ingredient. American depositary shares of Rio Tinto fell 39.72,
or 20%, to 154.27, off 72% from the peak this summer. Oil prices slid to below
$75 a barrel as the bust for commodities prices began to rival those of the
1970s and 1980s: The biggest decliner on the Dow, integrated oil giant Exxon
Mobil, fell 10.11, or 14%, to 62.35.

Southwestern Energy fell 9.06, or 29%, to 21.86; steelmaker AK Steel Holding
fell 3.13, or 21%, to 11.50; and fertilizer maker Potash of Saskatchewan fell
21.15, or 22%, to 76.85, its lowest level since the summer of 2007, when the
commodity sector took flight.

"You have recessionary fears coming back into the equation," said Marc
Roberts, director of research and technical analysis at Direct Access Partners.

The selling picked up steam in the late afternoon after most regional Federal
Reserve banks reported that manufacturing slowed and consumer spending
decreased in the Fed's Beige Book for September.

"This drop, although extreme, is quite normal, after the climax on Friday,
and then the big up day on Monday," said Lorenzo Di Mattia, manager of hedge
fund Sibilla Global Fund. Di Mattia said the market was "retesting" lows from
last week.

As on Sept. 29 and during last week's 18% loss for the Dow, the selling fed
on itself. As nervous clients demand cash from hedge funds and mutual funds,
traders say the only option left for many institutions is to sell. Buyers are
much harder to find.

"Some (hedge funds) have definitely slowed or stopped trading," said an
executive at a Wall Street broker Wednesday.

Many financial stocks fell as Fed Chairman Bernanke warned that credit
markets will take time to unfreeze. Bernanke added that the stabilization of
financial markets will not cause an immediate economic recovery. Bernanke
warned about a "feedback loop" where mortgage defaults are hurting banks,
causing them to restrict lending, which slows economic activity, leads to job
losses and triggers yet more defaults.

JPMorgan Chase fell 2.22, or 5.5%, to 38.49. The bank's third-quarter profit
fell sharply, hurt by $3.6 billion in market-related write-downs. JPMorgan
warned that its credit-card loss ratio could increase to 7% next year, from 5%
in the third quarter.

Wells Fargo shed 17 cents to 33.35 as third-quarter earnings declined, hurt
by investments in institutions such as Fannie Mae and Freddie Mac.

Credit-card issuer and Dow component American Express fell 3.78, or 13%, to

Hudson City Bancorp rose 63 cents, or 3.9%, to 16.70 after the New Jersey
bank said third-quarter profit increased and boosted its dividend.

EBay (Nasdaq) fell 2.41, or 14%, to 15.33. After the closing bell, the online
auctioneer cut its fourth-quarter revenue and profit projection. EBay's warning
sent shudders though the Internet sector, which has yet to experience a major

Yahoo (Nasdaq) fell 90 cents, or 7.1%, to 11.75 and shares of the Internet
portal company fell further in after-hours trading.

Intel (Nasdaq) fell 94 cents, or 5.9%, to 14.99. Third-quarter profit grew
12%, but the chip maker projected a wide range of revenue because it was
unclear how the financial crisis has affected end-user demand.

Shares of Coca-Cola tacked on 48 cents, or 1.1%, to 44.21, the only Dow stock
to finish in the green. The soda maker's third-quarter profit outgrew analysts'
expectations, as overseas business made up for lower North American volumes.

Coke's earnings came a session after rival PepsiCo, which gets a smaller
percentage of its revenue from overseas, reported a disappointing drop in
third-quarter results. PepsiCo Chief Executive Indra Nooyi said it was the
first-ever decline of the broad liquid refreshment beverage category in North

On Friday, Brinker International, the operator of eateries such as Chili's
Grill & Bar, slashed its fiscal first-quarter earnings estimate. Wednesday,
shares of Brinker fell 1.13, or 9.7%, to 10.54.

Insurers took another beating as analysts again raised concerns about losses
on their insurance portfolios. Small-cap Protective Life fell 3.61, or 22%, to
12.60 after Moody's Investors Service warned that the life insurer's losses
could hurt its "liquidity profile."

Fellow life insurer Genworth Financial fell 1.51, or 22%, to 5.23. MetLife
shed 3.78, or 10%, to 34.17.

-By Rob Curran, Dow Jones Newswires; 201-938-5176; robert.curran@dowjones.com

(Roger Cheng and Anjali Cordeiro contributed to this article.)

Click here to go to Dow Jones NewsPlus, a web front page of today's most
important business and market news, analysis and commentary:
http://www.djnewsplus.com/al?rnd=QrtSllHcvSwqAE2cjOAk%2Bw%3D%3D. You can use
this link on the day this article is published and the following day.

(END) Dow Jones Newswires

15-10-08 2144GMT

Copyright (c) 2008 Dow Jones & Company, Inc.

101508 21:44 -- GMT
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