Wall Street Limps Into New Week


Wall Street opened with a thud Monday as stock markets tumbled further around the world on worries about the health of the global economy.

However, news that the Treasury plans to start distributing money to major banks this week helped lift index futures contracts well off their lows.

In early trading, the Dow Jones Industrial average sank roughly 150 points.

The market got a brief boost from a report that showed sales of new homes recorded an unexpected increase in September as median home prices dropped to the lowest level in four years.

The Commerce Department reported Monday that sales of new single-family homes rose by 2.7 percent last month to a seasonally adjusted annual rate of 464,000 homes. Economists had expected sales would drop from the August level.

The median price of a new home sold in September declined by 9.1 percent from a year ago to $218,400, the lowest price level since September 2004, a period when home prices were rising rapidly as the country experienced a five-year housing boom.

A surge in the yen illustrated investors' nervousness about how much economic activity could slow. Japan's Nikkei 225 index dropped to its lowest close in 26 years as investors worried that the high yen will hurt Japanese exports and further disrupt economic activity. The currency moved to the 93 yen level and near 13-year highs. The yen is seen as a safe haven holding for investors who contend the Japanese economy will fare better in a global recession.

The Nikkei fell 6.4 percent to its lowest level since October 1982, while Hong Kong's Hang Seng Index tumbled 12.7 percent, its lowest finish in more than four years and its biggest single-session drop since 1991.

The sell-off came even as the seven leading industrial nations on Sunday issued a statement warning about the "recent excessive volatility" in the value of the yen. The G7 said it would "cooperate as appropriate," stirring speculation of an orchestrated intervention to help stabilize currency markets.

Selling spread to Europe when markets opened there. In afternoon trading, Britain's FTSE 100 fell 3.03 percent, Germany's DAX index lost 3.51 percent, and France's CAC-40 declined 6.23 percent.

Wall Street appeared comforted by the Treasury's announcement that it signed agreements with nine banks and will buy stock in the companies this week. The proceeds from the stock sales are intended to bolster the banks' balance sheets so they will begin more normal lending and help ease the continuing credit crisis.

More action from the government is expected Tuesday and Wednesday. The Federal Reserve holds a regularly scheduled two-day meeting that is prompting speculation that the world's major central banks could announce coordinated rate cuts. The Fed had already been expected to lower its fed funds rate by a half-point to 1 percent on Wednesday.

The ongoing selling is due in part to the belief that a worldwide recession is likely inevitable, but it's also being triggered by hedge funds and other investors unloading stock because they're being hit by margin calls. In a margin call, a broker who lent money to an investor calls in the loan, forcing the investor to sell stock to repay the loan.

On Friday, stocks ended at their lowest levels in five years, but not at their worst levels of the session. The Dow fell 3.59 percent, the Standard & Poor's 500 index fell 3.45 percent, while Nasdaq declined 3.23 percent.

The gyrations in stocks have been sizable since the market's peak a year ago, but particularly since last month's bankruptcy of Lehman Brothers Holdings Inc. and the government rescue of insurer American International Group. With investors uncertain about the economy, the market appears to be bouncing along a rocky bottom after falling sharply earlier this month.

Investors' fearfulness also fed demand for the safety of some types of government debt Monday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.62 percent from 3.72 percent late Friday. The dollar was higher against most other major currencies, except the yen, while gold prices rose.

The yield on the three-month bill, regarded as the safest asset around, rose to 0.86 percent from 0.82 percent late Thursday.

Investors around the world seemed largely unimpressed by government efforts to help lift market sentiment. South Korea's central bank cut its key interest rate Monday by three-quarters of a percentage point, its largest-ever reduction. The country's stock market benchmark Kospi ended with a 0.8 percent gain.

Elsewhere, central banks in Australia and Hong Kong added funds to their markets to boost liquidity.

Investors also digested a report from Verizon Communications Inc. that its earnings rose 31 percent in the third quarter after its wireless business showed stronger-than-expected results.

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