Dow, but Not Out: Massive Losses Avoided on Wall Street

What started out as a catastrophy on Wall Street ended as just another in a series of bad days for investors with the Dow Jones Industrial Average closing down 312 points.

Just a few months ago such a large drop would have been seen a miserable day. Today, investors were close to cheering.

The day started off with a massive drop in stock futures after a sell-off overseas, triggered by fears of a deep and prolonged global recession. The drop was large enough to trigger a trading halt but that halt appears to have helped Wall Street to avoid a market meltdown today.

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Within minutes of the 9:30 a.m. market open, the Dow fell 500 points. But after hitting a low of -501.46 points at 9:35 a.m., the index stabilized, staying down most of the morning. Throughout the day it slowly climbed, fell and climbed again. By 3:01 p.m., the Dow was only down 106.81 points before dropping down again. It never turned positive.

The Dow closed down about 315 points, or 3.25 percent. It was a bad day but nowhere near the catastrophe many were expecting at the start of the day.

The S&P 500 lost 3.5 percent and the Nasdaq lost 3.2 percent.

For the week, the biggest loser was the Nasdaq shedding 9.3 percent, compared to 6.8 percent for the S&P and 5.4 percent for the Dow.

For the month, the Dow is down 22.8 percent so far, the S&P is down 24.7 percent and the Nasdaq is down 25.8 percent.

Today's Stock Scare

Today's drop -- the latest in a miserable month for global stock markets -- was kicked off by companies reporting on their quarterly earnings.

The earnings reports have brought bad news and -- "virtually across the board -- there have been dim forecasts for earnings in the year ahead, showing just how deep this downturn is going to be.

For instance, Sony cut its earning forecast, leading the company's stock to drop more than 14 percent overnight. Toyota reported sales declines, pushing down the stocks of automakers Ford and General Motors. And in Germany, automaker Daimler saw its stock fall 11.6 percent.

It should be noted that today marks the anniversary of Black Thursday, the initial stock market crash in 1929 that eventually led to the Great Depression. (The two selloffs on Monday and Tuesday, Oct. 28, 1929 and Oct. 29, 1929, actually set off the panic.)

Asian and European markets -- already battered in the last month -- suffered further massive losses as investors unloaded stock.

Japan's Nikkei stock average fell 9.6 percent and Hong Kong's Hang Seng fell 8.3 percent. In Europe, the picture was just as grim. Great Britain's FTSE 100 was down 5 percent after the government there said its gross domestic product had fallen 0.5 percent in the third quarter, putting the country on the brink of recession. Germany's DAX was down 5 percent and France's CAC 40 dropped 3.5 percent.

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In the United States, the Dow futures fell the maximum allowed limit of 550, or 6.27 percent, this morning, causing market circuit breakers to kick in, freezing selling until the market's 9:30 a.m. open. Traders are prohibited from selling until that point, but they are allowed to buy.

The S&P 500 and the Nasdaq also both hit their limits, falling 6.6 percent and 6.2 percent respectively.

That triggered fears that another set of trading circuit breakers would be hit and halt trading when the markets open.

After the stock market crashes of October 1987 and 1989, the New York Stock Exchange instituted a rule -- called Rule 80b -- that provided for a stop to trading should there be a rapid and significant drop in the market.

Drop In the Stock Market: Rule 80b

In the event of an 1,100-point decline in the Dow Jones industrial average before 2 p.m., there would be a one-hour trading halt. If the drop happens between 2 p.m. and 2:30 p.m., there would be a 30-minute halt, and after 2:30 p.m., there would be no halt in trading.

If there was a 2,200-point decline before 1 p.m., there would be a two-hour halt in trading. Between 1 p.m. and 2 p.m., there would be a one-hour halt. And if such a drop happened after 2 p.m., the market would close for the day. The market normally closes at 4 p.m.

In the event of a 3,300-point decline, the market would close for the day regardless of time.

Rule 80b has only been used once -- Oct. 27, 1997. On that day the Dow was down 350 points at 2:35 p.m. and 550 points at 3:30 p.m., shutting the market for the remainder of the day. The trigger points were much lower at that time because the value of the Dow was much lower.

With reports from ABC News' Charles Herman, Daniel Arnall and The Associated Press.