Thread: Dow Crashes 3 Percent Euro Drops, Jobless Claims Rise

Dow Crashes About 3 Percent as Euro Drops, Jobless Claims Rise

Thursday, 20 May 2010 10:24 AM

The U.S. stock market extended its sharp slide Thursday as investors' already bleak view of the world economy worsened with another drop in the euro and disappointing U.S. employment news.

The Dow Jones industrial average fell more than 300 points, or 3 percent, in morning trading. Interest rates fell sharply in the Treasury market as investors once again sought the safety of U.S. government debt.

With Thursday's drop, the S&P 500 is down more than 10 percent from its 2010 trading high last month. Such a drop is considered by many analysts to be a "correction" in the market. Many analysts pay more attention to drops from closing highs, however, not trading highs.

WARNING: David Frazier Predicted Correction, Says Looming Market Crash Could Wipe Out Your Wealth.
The euro is falling again and continues to hover near a four-year low. It has become a key indicator for confidence in Europe's economy. The euro fell to $1.2329, a day after hitting $1.2146.

"There's a question out there now that potentially we could be talking about a collapse of the euro zone or countries breaking away from the euro," said Tim Quinlan, an economist at Wells Fargo & Co. As recently as four months ago, that wasn't even considered a possibility, Quinlan said.

Such a stark change in views has unnerved investors, and the euro is now largely driving stock trading. Major European indexes gave up their morning gains and are now sharply lower after the euro retreated.

Economic news also hit investor sentiment. The Labor Department said new claims for unemployment benefits rose by 25,000 to 471,000, their largest amount in three months. That came as an unpleasant surprise to investors who were expecting a slight drop to 440,000. High unemployment remains one of the biggest obstacles to a sustained recovery in the U.S. The latest report snapped a streak of four straight weekly declines and again calls into question the strength of the job market.

Weekly claims have been stuck around 450,000 since January, unable to break closer to the 425,000 range that is considered a sign that employers are regularly hiring new workers.

The employment report increased investors' worries about the global economy. They have been selling heavily the past few weeks amid growing concerns that Europe's debt problems will halt the recovery in the region and hurt the rebound in the U.S.

In midmorning trading, the Dow fell 256.12, or 2.5 percent, to 10,188.25. The broader Standard & Poor's 500 index fell 30.34, or 2.7 percent, to 1,084.71. The Nasdaq composite index fell 65.57, or 2.9 percent, to 2,232.80.

As investors pulled out of stocks and other risky investments like commodities, they moved into safer investments such as U.S. Treasuries.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.24 percent from 3.37 percent late Wednesday.

The demand for safety rose after Greek workers again took to the streets protesting recently approved budget cuts that were necessary for the country to receive a bailout. Greece was able to repay debt that came due Wednesday only because it had access to a rescue package from the European Union and International Monetary Fund.

The Dow has fallen for nine of the past 12 days. The Dow dropped 115 points on Tuesday and 67 points on Wednesday.

Crude oil fell $1.12 to $68.75 per barrel on the New York Mercantile Exchange.

At the New York Stock Exchange, only 115 stocks rose compared to 2,787 that fell. Volume came to 253 million shares, compared with 231 million traded at the same point Wednesday.

The Russell 2000 index of smaller companies fell 16.85, or 2.5 percent, to 657.55.

In afternoon trading, Britain's FTSE 100 fell 1.9, Germany's DAX index dropped 2.4 percent, and France's CAC-40 plummeted 3 percent.

http://www.moneynews.com/Headline/US-Wa ... ode=9EAD-1

German Finance Chief: Markets Are Out of Control

Thursday, 20 May 2010 02:32 PM

Effective regulation is needed if financial markets are to be kept under control, German Finance Minister Wolfgang Schaeuble told the Financial Times in an interview published on Thursday.

"I'm convinced the markets are really out of control. That is why we need really effective regulation, in the sense of creating a properly functioning market mechanism," Schaeuble told the paper.

"A market does not function properly if the risks and rewards are completely unbalanced," he said.

"We need transparency. Given the complexity of modern technology, the individual needs a chance to judge what he is doing. That's why we need standardization of products. And we need transparency for all market participants."

Germany blames much of the euro zone's debt crisis on financial speculation and announced a ban on naked short-selling of German bank shares and the bonds of euro zone governments on Tuesday.

Schaeuble said there was a disconnect between financial transactions and economic reality: "Minimum profits of 25 percent are simply unimaginable in the real economy. It isn't healthy."

Schaeuble admitted the chances of government leaders reaching a global decision on whether to introduce a financial transaction tax at the G-20 summit in Canada in June were slim, but said there should be a push for an agreement, if only among European countries.

"If we get a Yes, that is good. If we get a No, then we will once again work intensively to see if we cannot have a transaction tax at a European level."

Germany has faced calls from France's Economy Minister Christine Lagarde to boost its domestic demand, saying the country's large trade surplus threatens the competitiveness of other euro zone economies.

But Schaeuble said increasing the size of Germany's deficit would not help to stimulate growth.

"I respect the reproach ... that Germany must do more for growth. We have a role as a locomotive. But then I must ask: what should we do to grow faster? It cannot be by building up bigger deficits," he said.

Instead, he told the FT, Germany must boost its rate of employment by facilitating the integration of immigrants and removing barriers to the job market by reforming its system of long-term unemployment benefits.

Equally, other euro zone members, such as Spain and Italy should look to reform their labor markets, Schaeuble said.

"I am not giving advice for other countries, but I am just saying that everyone has a specific problem, and everyone also has specific budgetary room for maneuver to boost growth," he added.

http://www.moneynews.com/StreetTalk/SHO ... /id/359665

And this was just today. Dow has been on a slide since last month....and guess what, it's going down further. Gold and silver are also down, and I believe they both will decline further. Right now people are going for cash.