US stocks plunged overnight and the Standard & Poor's 500 came within
10 points of its bear-market closing low.
Capital-shortage worries shifted from Fannie Mae and Freddie Mac to
financial firms without government guarantees, such as Washington
Mutual and Lehman Brothers, the latter falling to its lowest closing
price in nearly a decade.
At the same time, commodities prices continued to decline.
One trader dubbed Monday's action on Wall Street “a great bull trap”
because the bounce may have seduced buyers.
The broad Standard & Poor's 500 plunged 43.28 points, or 3.41 per
cent, to 1224.51, its lowest close since the 1215-finish on July 15
and its biggest percentage drop since February 27 last year.
The Dow Jones Industrial Average fell 280.01 points (2.43 per cent) to
11230.73, giving back all but nine points of its Monday gains. The
technology-oriented Nasdaq Composite fell 59.95 (2.64 per cent) to
2209.81.
Since computer giant Dell raised concerns about technology spending in
parts of Europe and Asia about two weeks ago, tech stocks have felt
the claw of a bear market.
Lehman Brothers dropped 45 per cent to its lowest close since October
14, 1998, its biggest percentage drop ever.
The plunge reflected fears about its ability to raise capital.
Standard & Poor's placed Lehman's credit, including short-term
counterparty ratings, on “CreditWatch with negative implications”.
Nevertheless, S&P views the firm's short-term liquidity as
“satisfactory”.
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