Friday morning trading in Wall Street was chaotic. The Dow Jones industrial average dropped by more than 330 points. If it drops by 1,100 points before 2 pm, the New York Stock Exchange will activate “circuit breakers” that will temporarily shutdown the market to minimize losses. This is something that hasn’t been done since 1997. Before it opened, Dow futures had dropped 550 points which already triggered a trading halt in stock futures contracts to slow the decline.
Stock markets worldwide already plummeted Friday with oil prices taking a nose dive to the lowest levels in more than a year. Even the more stable gold prices fell sharply. Amid fears that worldwide financial markets are declining, many fear that governments and banks are not capable of resolving the deepening global recession.
Japan’s Nikkei stock average dropped 9.6% while Germany’s benchmark DAX index plunged by 10.8%. On the other hand, France’s CAC40 dove 10% and Britain’s FTSE 100 slid by 8.7%. Hong Kong’s Hang Seng index dropped 8.3 percent while markets in India, Thailand, Indonesia and the Philippines were also taking a dive.
Investors worldwide seem to believe that the global economy is indeed on the brink of a recession. Despite attempts by governments to take steps to avert, markets are not convinced and everyone is taking precautions, preparing for the worst.
Goldman Sachs, Chrysler and Xerox all announced they were laying off thousands of workers. The White House announced Thursday that the economy is going through a “rough ride.” Former Federal Reserve Chairman Alan Greenspan, testifying before a House committee, said he does not foresee any way for the government to avoid layoffs and unemployment. Analysts predict that the slide will continue into the current quarter and the first quarter of 2009. The classic definition of a recession is at least 2 consecutive quarters of negative growth.
As outlooks remains gloomy, this will continue to feed the decline in financial markets. Halloween seems to have come a week early this year.