Treasury Secretary Henry Paulson announced the government will not buy bank’s toxic mortgage assets after all, sending dismay to investors and Wall Street, which negatively affected exchange traded funds (ETFs).
Much of Wall Street was excited about the prospect of having the bad debt wiped off companies’ books.
The rejection of this proposal as of Wednesday sank the Dow Jones Industrial Average another 250 points midday, with major indexes retracting more than 2%, reports Sara Lepro for Associated Press.
The $700 billion bailout plan is proving to be time-consuming and instead the focus will be on buying stakes in banks and encouraging them to resume normal lending.
In response to the financial turmoil, consumers have cut their spending back, with retailers stuck in the toughest environment yet. Best Buy Co. (BBY) cut their fiscal 2009 earnings outlook lower than analysts’ estimates, while Circuit City (CC) filed for bankruptcy protection because of a lack of vendor confidence and low liquidity amidst the economic panic, reports Betsy Vereckey for Associated Press.
SPDR S&P Retail (XRT) is down 41.6% year-to-date.
The Bank of England is warning about the risk of deflation because of the stunted global growth, and oil responded by dropping to $57 per barrel. Oil prices have plunged more than 60% in four months, falling from a record $147.27 in July, reports Dirk Lammers for Associated Press.
Since crude is bought and sold in dollars, when the dollar rises against foreign currencies, investors often buy the greenback and sell oil.
One analyst reports that investors are adjusting to a new reality that involves a slowing global economy with a strong dollar, weak commodities and a fear of deflation, or a general decline in prices. If global growth wanes, the demand for gas and other crude products will, too. The commodities are experiencing the boom-bust cycle right now, so insiders are trying to keep consumers from panicking.
United States Oil (USO) is down 36.5% year-to-date and is 59% off its July 14 high.