Bushonomics: Stocks zigzag, end lower after emergency rate cut

Traders work on the floor of New York Stock Exchange, on 8 October 2008.

8 October 2008
By JOE BEL BRUNO

NEW YORK -An angst-ridden Wall Street tried but failed to find stability Wednesday, with investors trying to determine whether an emergency interest rate cut would end the paralysis in credit markets. The major indexes moved in and out of positive territory, before turning sharply lower in late trading and leaving the Dow Jones industrials down nearly 190 points.

The Federal Reserve and other leading central banks cut rates in the hope that credit markets would soon relax and that banks would begin lending more freely to businesses and consumers. The Fed lowered rates by a half-point, saying in a statement that the turmoil in financial markets posed a further threat to an already shaky economy; it was joined in the rate cut by the European Central Bank, Bank of England, The Bank of Canada, the Swedish Riksbank and the Swiss National Bank.

But interest rate changes take months to work their way through the economy, and while investors clearly were happy with the central banks' actions, they were also well aware that in the near term, banks remain reluctant to lend because of fears they won't be paid back.

Trader working on the floor of the New York Stock Exchange, 8 October 2008; the man looks like he is crying?

Although Wednesday's losses were smaller than Monday's 370-point drop in the Dow and Tuesday's 504-point slide, it was obvious that the stock market is still extremely shaky.

"Everyone's kind of scratching their heads," said Jim Herrick, manager of equity trading at Baird & Co. "It's certainly disconcerting for investors and the overall marketplace."

A worried broker for the S&P 500 pit reacts as he works in the Chicago Mercantile Exchange, on 8 October 2008.

According to preliminary calculations, the Dow Jones industrial average ended down 189.01, or 2.00 percent, at 9,258.10.

Broader stock indicators also fell. The Standard & Poor's 500 index slid 11.29, or 1.13 percent, to 984.94, and the Nasdaq composite index fell 14.55, or 0.83 percent, to 1,740.33.

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