In one of the most volatile trading days in stock-market history, U.S. stocks finished lower Wednesday for the sixth straight session -- leaving the Dow Jones Industrial average and S&P 500 index with the worst yearly declines since 1937.
The coordinated 50 basis-point interest rate cuts announced by the Federal Reserve, the European Central Bank, the Bank of England, Bank of Canada, Swiss National Bank, and the Swedish Riksbank didn't do much to soothe investors. The moves were part of an effort to revive sliding economies and assist in rescue plans for the global banking crisis. Some economists are skeptical the moves will work.
Stocks swung up and down throughout the day, and were trading higher up until the last few minutes of the session. In the last hour of trading Wednesday, Treasury Secretary Henry Paulson said that all the financial market turmoil has seriously affected the economy, but he said the administration is moving quickly to begin the largest government rescue effort in history. Even with the program to buy bad assets from financial institutions, some banks will fail, he said. It would be several weeks before the program makes its first purchases of troubled assets, he said. Paulson also called for patience saying "the turmoil will not end quickly and significant challenges remain ahead."
Investors' reaction: Keep selling. So even after policymakers provided another shot of liquidity, the great stock market debacle ended its sixth day of losses.
By the end of trading Wednesday, the blue-chip Dow Jones industrial average lost 189.01 points, or 2.00%, to 9,258.10. The Dow is now down 30.2% for the year, making it the worst year since 1937's decline of 32.8%.
The broader S&P 500 index fell 11.29 points, or 1.13%, to 984.94. The index is now down 32.9% for 2008.
The tech-heavy Nasdaq composite index shed 14.55 points, or 0.83%, to 1,740.33, bringing its loss for the year to 34.4%.
If it's any consolation, the markets still have a ways to go to beat the worst year of the Great Depression, 1931, when the Dow fell 52.7% and the S&P 500 plunged 47.1%.
On the New York Stock Exchange, 25 stocks were lower in price for every seven that advanced. The ratio on the Nasdaq was 21-7 negative. Trading was active on Wednesday.
The market volatility had "floor traders shaking their heads," notes S&P MarketScope. The VIX volatility index, the market's favored fear gauge, climbed 7.2% to 57.53 on Wednesday.
Indeed, the fear and uncertainy are not going away, and there's very little hope for a turnaround. "The damage has been done," wrote Paul Kedrosky on his blog Infectious Greed on Wednesday. "The global banking system is a mess, like a patient that has been poked by too many interns and fed (no pun intended) too many experimental medicines."
"It's impossible to know any more whether it's the illness or the medicines that are hurting things here," Kedrosky wonders. "And even if we have jury-rigged a semi-functional banking system again, the rapid contraction of the real economy is set to feed back into the financial system, causing more credit problems. The effects will be vicious."