Stocks tumble; Dow drops more than 130 (dampening of Corporate profits report)

[rodeodance]

Source: ap




Stocks tumble; Dow drops more than 130

By MADLEN READ, AP Business Writer 30 minutes ago

NEW YORK - Wall Street pulled back Wednesday, sending the Dow Jones industrials down more than 130 points on Merrill Lynch & Co.'s severe credit-related losses and a sharp September drop in existing home sales.


The market got one of its most-feared scenarios: Not only is the housing implosion dampening corporate profits, it's accelerating.

Merrill said it wrote down $7.9 billion in fixed-income instruments called collateralized debt obligations and from defaulting subprime mortgages — more than the $5 billion writedown the investment bank estimated earlier this month. The result was a net loss for the quarter of $2.3 billion.

The worse-than-anticipated loss indicated the financial sector may be in a more dire situation than anticipated because of the credit squeeze that was triggered in part by spikes in mortgage defaults. In a conference call with investors, Merrill CEO Stan O'Neal pointed to "renewed signs of volatility and weakness" in the market environment. Merrill shares dropped $4, or 5.9 percent, to $63.12.

Read more: http://news.yahoo.com/s/ap/20071024/ap_on_bi_st_ma_re/wall_street;_ylt=Asob8XiP8mkN032MQEff.BCs0NUE

[Fovea]

1. ah. velocity.

It don't just go up.

The secondary impacts were not much talked about when the bubble burst. Here they come. Just in time for Xmas.

Ho ho ho, bah humbug.

[natrat]

2. no worries-they will just print more money-seriously

[Fovea]

8. You are probably right

After all, it worked so well for the Weimar Republic.

I have been predicting that we will have our own Rentenmark any day now. It won't work as well as the original.

[DaveJ]

3. I keep saying it but nobody listens

Homes should not be treated as investments but as essential items within simple reach of everyone. It's not anti-capitalist thinking, but just the reality of things. I hope it doesn't take a total economic crash for people realize it. But it probably will.

[Mudoria]

4. And sometime within the next week

it will go up 130 points.

[no_hypocrisy]

5. Maybe, just maybe there wouldn't be "dampening profits" if:

1. there was more money available to buy stuff that translates into profits,
2. there was a modicum of job security,
3. there were more good-paying jobs with benefits,
4. a pitance of jobs were outsourced,
5. property taxes didn't rival the amount of mortgage and interest,
6. gasoline didn't keep increasing in price ($1.08 for SUPER in 1998), and
7. jobs paid for health insurance premiums.

[Warpy]

6. Exactrly.

Low income and uncertain jobs mean no customers. No customers mean no demand. No demand means no sales at the industrial level. No sales mean more people get laid off at every level of the market from raw materials to production to distribution to shipping to sales. More people getting laid off means even less job security for those who still have jobs.

Plus, they've expected debt to make up for stagnant wages for a very long time.

As people find they can no longer leverage cheap debt against their home equity, they delay purchases. Even credit card companies are tightening up, as evidenced by the drop in credit card junk mail over the past year.

The only people who still think this economy are the people who think they can continue to live on debt forever.

[AnneD]

7. I never thought...

that you could leverage velocity. Interesting idea......