Whistling Past the Graveyard

August 14, 2007

Dow Falls More Than 200 Points

Filed at 4:24 p.m. ET
NEW YORK (AP) — Wall Street pulled back sharply Tuesday as investors worried about fundamental economic problems as well as the ongoing fallout from credit market problems and stocks’ own volatility. The Dow Jones industrials skidded more than 200 points.
The downturn in stocks was first triggered by a report from Wal-Mart Stores Inc. that profit will fall below expectations this year as consumers rein in spending. Home Depot Inc., the world’s biggest home improvement chain, added to the slide when it said weakness in the housing market caused quarterly profit to slide.
Confirmation that Sentinel Management Group Inc., which oversees $1.6 billion in assets, is seeking to halt investor redemptions exacerbated the selling. Other funds are said to have similar problems as they face withdrawal demands at a time it has become difficult to value low-quality debt.
Hedge funds and other big institutional investors have taken a beating in recent weeks due to the market turbulence. On Monday, Goldman Sachs Group Inc. said three funds it manages have had significant losses — and infused $3 billion in capital into one of them.
Wall Street has been pummeled as a deepening credit crunch spooked the market, and led to unease about potential losses at financial firms and funds. The Federal Reserve, which has injected some $64 billion of liquidity into the U.S. banking system since Thursday, said Tuesday it stood ready to act again should market conditions warrant.
I suspect we are a long way from the bottom of this, which may find the Dow at 6 or 7,000 by the time things have righted themselves. Not because of the sub-prime problems–those are easy enough to absorb. But endless debt, based on endless overspending, hasn’t yet been replaced as a market indicator. A dollar worth half what it was in those storied days of Clintonism?
How quickly we forget and how thoroughly the market remembers for us.

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