Wall Street expected to plunge

Wall Street was expected to plunge at the opening of trading on Tuesday, extending its huge losses from last week and taking more cues from heavy selling that has spread throughout the world. Indicators showed the Dow Jones industrial average was set to fall by about 500 points when trading begins.

Fears of a recession in the United States that could pull down the global economy as well have infected markets around the world, and those declines further unnerved US investors who were unable to trade on Monday, when Wall Street was closed for the Martin Luther King Jnr Day holiday.

Dow Jones industrial average futures fell 476, or 3,93%, to 11 630. Standard & Poor’s 500 index futures fell 57,3, or 4,32%, to 1 628.
Nasdaq 100 index futures dropped 77, or 4,16%, to 1 772,5.

In Asia, Japan’s Nikkei stock average closed down 5,65% and Hong Kong’s Hang Seng index lost 8,65% a day after showing its biggest losses since the September 11 2001 terrorist attacks.

In late-morning trading, Britain’s FTSE 100 rose by 0,55%, Germany’s DAX index fell by 0,97% and France’s CAC-40 rose by 0,47%.

JSE

In South Africa, the JSE was down only 0,83% at noon on Tuesday, as buying interest among banks helped it recover from sharp losses of more than 4% in the morning session.

By noon, the platinum mining index fell 2,27%, resources were down 1,72% and the gold mining index pulled back 1,47%. Industrials eased 0,28%, but financials perked up 0,33% and banks lifted 0,75%.

“The JSE is looking much better after its very gloomy start. The FTSE in the United Kingdom had a nice little rally this morning, with buying coming back into banks and financial stocks there, which helped lift banks and financials on the JSE,” said a Johannesburg-based equities trader.

He added that resources were still very weak, as demand had dropped, but that some rand-hedged stocks like Remgro were doing better. At noon, diversified industrial group Remgro was R3,48, or 1,98%, higher at R179,48.

He also said that it was still a mixed market across the board. “I think the volatility in the market is the highest it has ever been, and it is probably higher than at the time of the initial subprime concerns.”

He said: “However, I don’t think that Wall Street is going to be down as much as everyone thinks it will be when it opens later,” adding that the JSE would take direction from the US market when it opens later.

Gains

Some of the more modest moves in major global indexes on Tuesday belie the huge drops many saw on Monday. Some of the gains came amid speculation that central banks around the world would step in with coordinated interest-rate reductions to help shore up jittery markets.

A big question is whether the US Federal Reserve, scheduled to meet next week, will make an emergency interest-rate cut before then.

Last week, each of the major US indices fell by more than 4% as investors grew sceptical late in the week that plans by US lawmakers and President George Bush to stimulate the US economy will keep the US from tipping into recession. The plan Bush announced on Friday, which requires the OK of Congress, outlines $145-billion in tax relief to help spur consumer spending.

Bond prices rose sharply as investors searched for safety amid the global stock pullback. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3,51% from 3,63% late on Friday.

The dollar was mixed against other major currencies, while gold prices rose.

Corporates

Corporate news weighed on stocks as well as concerns about the widespread pullback in stocks.

Bank of America said its fourth-quarter earnings fell sharply amid credit losses and weak investment banking results. Profits at the bank declined to $268-million, or five cents per share, from $5,26-billion, or $1,16 per share, a year earlier.

Meanwhile, Wachovia said its fourth-quarter earnings fell by 98% after the bank wrote down $1,7-billion in the value of certain portfolios and set aside $1,5-billion to cover bad loans. Earnings fell to $51-million, or three cents per share, from $2,3-billion, or $1,20 per share, a year earlier.

There was some good news. DuPont, one of the 30 stocks that make up the Dow industrials, said its fourth-quarter profits fell by 37% from a year ago when earnings benefited from one-time items. Earnings fell to $545-million, or 60 cents per share, from $871-million, or 94 cents per share, in the year-ago period. But excluding items, results topped Wall Street’s expectations amid strength in its international business.—Sapa-AP, I-Net Bridge

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