4.00 PM VIX panic index up 40% to highest level since credit crisis. DJIA closes at lows off 628 which is 5.3%.NYSE trades 2.3 billion shares NASDAQ off 6.9%. S&P down nearly 6.7%. Gold closes at all-time high at $1,718. Oil down 7.2% to $80.79. Many traders believe crude drop below $80 support level tomorrow. Bank of America was off over 20% on concerns about mortgage portfolio, and suit by AIG over mortgage paper sold by the bank to the insurer Citigroup (NYSE: C) down 17%.
3.55 PM Bank of America releases statement which supports management and says the firm will not need to raise money. Shares in the bank make a brief reversal higher and then sell down again. Bank of America down 19% near the close.
3.46 PM DJIA dropped by 600 again. CNBC reports some major hedge funds have lost double digits. Panic appears to have moved to major institutions. S&P below 1,125 barrier.
3.33 PM Big oil stocks are now being hit by the sell-off in crude. WTI closes off over 6% to $81.60. Exxon Mobil (NYSE: XOM) down 5.1%. BP (NYSE BP) off 6%
3.20 PM The great irony of the day is that the 10-year Treasuries are yielding 2.36% –the lowest level since May 2009. The downgrade of US paper to AA+ does not seem to harm it as the market’s major safe haven
3.07 PM S&P will not downgrade debt in several major companies. These include Johnson & Johnson (NYSE: JNJ), Microsoft (NASDAQ: MSFT), Exxon Mobil (NYSE: XOM), and ADP
2.53 PM High dividend, iron-clad-balance companies are among the few not caught in the downdraft. AT&T (NYSE: T) off only 3% and yields 5.9%. McDonald’s (NYSE: MCD) down 2.7% with yield of 2.9%–both stock still near year-long highs
2.36 PM DJIA plunges 600 points and threatens 10,500, now close to a 20% correction since the July peak, which would officially make this a bear market. S&P even worse now, off 5%. Normally strong tech sector pulled under with Microsoft down 4% and Cisco off 5%.
2.28 PM A panic over possible mortgage-backed securities sales fraud against Bank of America (NYSE: BAC) by AIG (NYSE: AIG) drives the bank’s shares lower by 20%. Citigroup (NYSE: C) which also may be party to a legal was down 17%.
2.15 PM The slaughter in Europe ends as the Dax drops 5.2% at the close and the FTSE ends off 2.6%. As in the US, banks take the brunt of the drop as concerns about mortgage and sovereign debt pull down the industry. Royal Bank of Scotland fell 6.2%, and Deutsche Bank sold down nearly as much. The ECB decision to buy bonds from Italy and Spain helped the lower yields but equities were unaffected.
1.45 PM GM (NYSE: GM) and Ford (NYSE: F) hit 52 week lows. Traders believe that a new recession will cut car sales and that a spike in Treasury rates will raise the cost of auto loans.
1.09 PM Obama says that the US will always be a Triple-A rated nations and investors should treat it as such. “We didn’t need a rating agency to tell us we need a balanced, long-term approach to deficit reduction. My hope is that Friday’s news will give us a renewed sense of urgency,” Obama said at a hastily called press conference. A continued sell-off indicated the markets were unimpressed.
12.38 PM Moody’s indicated that it did not agree with the S&P downgrade of US paper to AA+, at least for now. “If the process for further deficit reduction that is included in the Budget Control Act produces results that are not really credible, that combined with the economic performance could potentially cause an early move on the rating,” Moody’s analyst Steven Hess told Reuters
12.15 PM S&P could not resist another downgrade as it dropped its outlook on Warren Buffett’s Berkshire Hathaway (NYS: BRK) to “negative” from “stable.” Berkshire and several other large insurers pay rates tied to Treasuries.
12.03 PM Gold breaks above $1,720 as money faces to safe havens. The metal is up 4.3% for the day.
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