US stocks plunge, oil price surges $25September 23rd, 2008 - 11:02 am ICT by Amrit Rashmisrisethi
US stocks plummeted again on Monday by more than 3% across major indices, while oil prices soared amidst uncertainty on Wall Street over the US government’s proposed mammoth bailout and whether it will rescue the American economy.
The blue chip Dow Jones Industrial Average this morning (Thai time) shed 372.75 points, or 3.27%, to 11,015.69. The broader Standard & Poor’s 500 Index slumped 47.99 points, or 3.82%, to 1,207.09. The technology- heavy Nasdaq Composite Index lost 94.92 points, or 4.17%, to 2,178.98.
Banks, retailers and technology companies led the decline after a weekend of headline-grabbing news about the mammoth $700 billion bailout proposed by US government to buy up bad mortgage assets and other failing securities.
The price of crude oil climbed by $25 per barrel on Monday, the largest jump ever over worries of a weakened dollar prompted by the bailout programme,
Both US’ Democrats and Republicans in Congress said it put too much power in the hands of US Treasury Secretary Henry Paulson. Legislators proposed a raft of additions to the request from the White House to insist that companies selling the bad assets to the government limit executive salaries and cede company shares to the US government.
But US President Mr. George W Bush and his economic lieutenants insisted that Congress must act speedily to save the US economy and tackle regulatory measures later.
“They really haven’t changed the economic fundamentals at all,” Jeffrey Coons, co-director of research at Manning & Napier Advisors Inc. in Fairport, New York, was quoted as saying by Bloomberg news agency. “We still have a debt-laden US consumer facing falling employment.”
The Bush bailout plan would help free up credit that is clogged in a finance system bogged down by bad mortgage debt and bank foreclosures. US President Mr. Bush and Mr. Paulson have warned of dire economic consequences if Congress does not pass its plan.
The buyout has also increased concerns about the federal government’s growing budget deficit.
The financial woes on Wall Street have boosted the appeal of commodities like oil.
“Gold, silver, oil, copper, just about any hard asset, is looking good at this point,” Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd in New York, told Bloomberg. “With the dollar down and stocks getting hit, commodities look like a safe play.”
The price of oil for October delivery on the New York Mercantile Exchange jumped by 25 dollars to 130 dollars a barrel, before settling at 120.92 dollars, or a 16.37-dollar increase for the day’s trading.
The US currency fell to 67.59 euro cents from 69.13 euro cents on Friday. The greenback also declined against the Japanese yen to 105.38 yen from 107.45 yen on Friday.
Last week, stock indices whipsawed as much as 4% a day over the bankruptcy of Lehman Brothers, the purchase of Merrill Lynch by Bank of America and the US government’s 85-billion-dollar bailout of the insurance giant American International Group Inc.
Source : National News Bureau, Public Relations Department of Thailand