US stocks tumble as investors wary about economic outlook

October 9th, 2008 - 5:38 am ICT by IANS  

Washington, Oct 9 (DPA) US stocks fell for a sixth day Wednesday despite the Federal Reserve’s emergency interest cut rate and after the International Monetary Fund warned of a recession until early 2009.The Fed lowered its target for the federal funds rate by 50 basis points to 1.5 percent.

It joined the central banks of Britain, Canada, Switzerland, Sweden and China, as well as the eurozone’s European Central Bank, which also delivered a 50 basis points cut in their lead rates in a bid to ease monetary conditions and shore up market liquidity.

While investors welcomed the emergency rate cuts, the IMF’s semi-annual report on the state of the global economy dampened enthusiasm.

Treasury Secretary Henry Paulson warned that more banks will collapse as the financial system undergoes a prolonged period of restructuring.

A US recession was to be expected as the financial system works its way out of a crisis that has severely curbed the availability of credit to businesses and consumers, the IMF said.

It expected a contraction during the second half of 2008 and growth of a mere 0.1 per cent in 2009 - down from 0.8 percent in its July forecast. The economy grew by 2 percent in 2007.

Meanwhile, Bank of America Corp slid 7 percent after selling shares at a discount, and Alcoa - the largest US aluminium producer - dropped 12 percent on reduced anufacturing.

The blue-chip Dow Jones Industrial average fell 189.01 points, or 2 percent, to 9,258.10. In the past week alone, the Dow has shed close to 1,600 points. The broad-based Standard and Poor’s 500 lost 11.29 points, or 1.13 percent, to 984.94. The high-tech Nasdaq Composite index shed 14.55 points, or 0.83 percent, to 1,740.33.

The dollar slid against the Japanese currency to 99.20 yen from 101.47 yen Tuesday. It also declined the most against the euro in more than two weeks, dropping to 73.33 euro cents.

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