Gold Surges 10%; Banks, Financials Plunge

123jump.com Staff
17 Sep, 2008
New York City

Banks, brokerage houses, insurance companies and credit card processors fell sharply after the U.S. bailout of AIG failed to improve liquidity in the interbank loan markets. Dow, Nasdaq, Russell 200 and S&P 500 plunged as much as 5% before rebounding to a loss of more than 3%. Banks plunged more than 8% and Goldman Sachs and Morgan Stanley declined more than 20%. Crude oil fell but gold surged as investors lose their confidence in central bankers.

[R]2:45PM New York – Financial stocks drop sharply as benchmark stock indexes decline more than 3%.[/R]

Markets around the world were looking for clues to what happens next in the U.S. Once the pillars of the U.S. financial systems companies including Lehman Brothers, Merrill Lynch, Bear Stearns and now AIG are either sold, bankrupt or nationalized.

The three popular averages dropped close to 5% before recovering to a loss between 2.5% and 3.5%. Dow, Nasdaq, S&P 500 and Russell 2000 traded in the negative territory for the most of the session.

Brokerages Plunge

The two remaining independent large brokerage houses plunged as investors worried about their fate. Morgan Stanley earnings declined less than expected and Goldman Sachs earlier reported 70% decline in earnings.

Goldman Sachs ((GS)) dropped 24.5% or $32.57 to $100.34 and Morgan Stanley plunged 38% or $10.83 to $17.96.

Insurance Follow AIG Losses

Insurance companies dropped tracking the losses in AIG. Hartford Financial Group ((HIG)) dropped 8.5% or $4.93 to $52.73, MetLife ((MET)) declined 5.1% or $2.79 to $54.17, Prudential ((PRU)) fell 5.8% or $4.55 to $74.22 and German insurance giant dropped 4.5% or 67 cents to $13.51.

Banks Decline

Banks participated in the declines as well. Wachovia Bank ((WB)) led the decliners with a loss of $2.10 or 19% to $9.47, Citigroup ((C)) fell 18% or $2.24 to $13.51, Bank of America ((BAC)) dropped 5% or $1.61 to $27.91 and JP Morgan Chase ((JPM)) slid 9% or $3.27 to $37.55. Washington Mutual ((WM)) fell 8% or 14 cents to $2.17.

Tougher Credits

Credit card related companies fell on the worries that tight lending will curb consumer spending. Visa ((V)) dropped $1.75 to $64.60, MasterCard ((MA)) declined $15.24 to $199.62 and American Express ((AXP)) plunged $1.60 to $34.50.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 140.07 or 1.21% to 11,749.79, Hang Seng index in Hong Kong decreased 663.42 or 3.63% closed to 17,637.19. ASX 200 index in Australia decreased 28.60 or 0.60% to close 4,722.20. The KL Composite index in Malaysia decreased 9.38 or 0.93% closed to 1,002.99.

The Kospi Index in South Korea increased 37.51 or 2.70% to close at 1,425.26, SET index in Thailand closed lower 19.42 or 3.11% to 605.14 and JSE Index in Indonesia increased 34.26 or 1.97% to 1,769.89. The Sensex index in India decreased 255.90 or 1.89% closed to 13,262.90.

Europe Markets Review

In London FTSE 100 Index closed lower 113.20 or 2.25% to 4,912.40, in Paris CAC 40 Index decreased 87.29 or 2.14% to close at 4,000.11 and in Frankfurt DAX index lower 104.19 or 1.75% to close at 5,860.98. In Zurich trading SMI decreased 78.60 or 1.17% to close at 6,654.33.