Investors today flip-flopped between optimism and fear, sending stocks on a wild yo-yo ride as governments raced to stabilize world financial markets.
Despite a coordinated effort early this morning by the world's central banks to jointly cut interest rates, investors couldn't decide if the measures were sufficient and if the market had yet hit bottom, meaning it would finally be safe to start buying again.
The Dow Jones industrial average was down as much as 250 points and up as much as 180 points today before closing down 189 points. It was the sixth straight day of loses on Wall Street.
The Nasdaq lost 0.8 percent today and the S&P 500 lost 1.1 percent.
The Dow had lost 13 percent of its value in the past five days and 20 percent in the last 12 days. Today added another 2 percent on to those losses.
"We're due for some type of bounce," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "We know that. It's going to bounce eventually."
"The Fed and world governments have done a lot up until now and clearly nothing has worked. This move here is one the last bullets in the chamber," he added.
Detrick warned though that many investors are pulling their money out of hedge funds, which is likely to cause further downward pressure for the market. Also, companies are now starting to report quarterly earnings that could disappoint investors.
Like many on Wall Street this morning, R. Don Elsey, CFO of Emergent Biosolutions, said that with all the governments working together, he believes the markets will recover but "it is going to take time."
"It will help but it is just one of many things that has to happen though. By itself it's not going to cure the issues we have today," Elsey said.
World Reacts to Financial Market
Overseas, the picture was not quite as optimistic.
Japan's Nikkei index fell 9.4 percent, its worst showing since the crash of 1987, following yesterday's 500-point drop in the Dow. European markets were also in for a bad start, but then came word of the international government action.
The United States Federal Reserve, along with the Bank of Canada, the Bank of England, the European Central Bank, Sweden's central bank, the Swiss National Bank and China's central bank, all cut interest rates by half a percentage point.
In the U.S., that means the key Fed Funds rate now stands at 1.5 percent, down from 2 percent and at its lowest point since September 2004.
In Europe, the rate cut helped struggling stocks to rally, pushing Great Britain's FTSE index off from its lows and into positive territory. But that rally didn't last long, with the market there ending the day down 5.2 percent. The German DAX also lost 5.9 percent and Paris' main stock index lost 6.3 percent.
Back in the U.S., the Dow started the day down 230 points. Those losses were quickly erased with the Dow turning positive just 10 minutes into the trading day. But then, just 40 minutes later, stocks again turned negative and stayed there for most of the morning. At 12:35 p.m., the Dow was down 250 points but by 1:15 p.m., the roller-coaster ride started to turn again with stocks going positive, then negative and then staying positive around 1:40 p.m.
But then at 3:39 p.m., as Treasury Secretary Henry Paulson gave an update on the economy and the $700 billion government bailout, stocks again went negative. And then they just kept falling.
Wild Ride on Wall Street
The wild ride on Wall Street led one anchor on financial news network CNBC to say: "It's like the weather in Denver, if you don't like it, just wait."
David R. Kotok, co-founder and chief investment officer of Cumberland Advisors, said that Wall Street has yet to hit the climax of the selling frenzy. The market has been close but fallen short several times because the government steps in before a bottom can be reached.
"Each time, the trigger for the reversal was an intervention. Therefore you didn't have a clean climax in which the last investor capitulates and throws in the towel in the ring," Kotok said. "And here again, we didn't get it this morning."
Kotok said he believes "we are in a bottoming process" but just haven't hit the actual bottom yet.
"I thought we might see it today … but we have this issue of response to an intervention," he said. "True terror doesn't get saved by a Federal intervention and that's the missing link. And it may be that we have exhausted the sellers without having the true terror. That remains to be seen."
Kenneth S. Rogoff, an economics professor at Harvard University and a former economist at both the International Monetary Fund and the Federal Reserve, called the cut "a positive development."
"But the panic is so overwhelming at this point, that they really need to fire on all fronts," Rogoff said, adding that the 0.5 percent, or 50-basis-point, cut, "should have been more aggressive."
"They think 50 basis points is aggressive. But in this environment it's not," Rogoff said. "It should have been 100."