Markets Erase Gains, Dow Loses 519 Points
Stock volatility continued on Wall Street Wednesday as markets turned their attention once more to the weak global economy. After an impressive rally Tuesday, fears about high levels of public debt in the U.S. and Europe have erased all the gains and then some. There is growing concern that the global economy may be heading toward another painful recession.
Despite the U.S. Federal Reserve's assurances that it will keep interest rates near record lows for the next two years, all the gains made this week evaporated even before the opening bell.
On closer examination, New York trader Keith Bliss says many now see the Fed announcement as an admission that the world's most powerful central bank is out of ammunition.
"The Fed is basically out of bullets. It's similar to those Hollywood movies where you see the guy fire all his bullets and now the only thing he has left to do is throw his gun," Bliss said.
But Bliss says the slowing U.S. economy is not the only issue roiling the markets.
"And this is how skittish and temperamental the market is. It reacts not only to factual aspects and fundamental aspects, but also rumors. So there was a rumor that S & P (ratings agency Standard & Poors) was going to downgrade France's debt, there's rumors that there are French and German banks in trouble because they're holding a lot of sovereign debt over in Europe," Bliss said.
Some see the combination of a weak U.S. outlook and the prospects of another debt crisis in Europe as a recipe for a double dip recession. Financial expert Jon Henes tells VOA even the remedy is fraught with peril.
"We have a debt problem in the United States and we have a debt problem in Europe. And to get out of a debt problem you have to reduce debt and when you reduce debt you end up having slow economic growth," Henes said.
It is a tough pill to swallow for many Americans, who have seen the financial market's losses eat into their retirement savings.
"To see my 401K (tax-deferred retirement fund) drop 40 percent over the last year or two, even more so in the past couple of days -- that's devastating," one man said.
"We just need to have faith and roll with the punches and do the best we can whatever happens, but it is looking scary," one woman said.
On Wall Street, fear of high risk and heavy losses helped fuel another major sell-off. Some broad market indices have now fallen more than 20 percent since April. Unless there's a turnaround soon, analysts say the decline could signal the unofficial start of a bear market. |