Stocks hit bearish lows in Wednesday trading

ByABC News
October 23, 2008, 2:28 PM

NEW YORK -- Stocks plunged to fresh bear market lows Wednesday as a spate of scaled-back profit outlooks from U.S. companies fanned fears that the economy faces tough times in the months ahead.

After weeks of intense selling on worries that the credit crunch would cause a financial system meltdown, the angst on Wall Street is quickly shifting to the business fallout of the ongoing crisis, such as lower earnings, slower growth, mounting job losses and a global recession.

The Standard & Poor's 500, a broad market gauge, fell 6.1% to 896.78, undercutting its Oct. 10 panic low of 899.22. The drop is significant because it extends its bear market loss to 42.7% and signals that stocks have not stopped falling. The Dow Jones industrials fell 514 points, or 5.7%, to 8519.

The "fall suggests that there is a very real risk that a bottom is not in place," says Todd Salamone, analyst at Schaeffer's Investment Research.

"Taken together, it appears we are hearing an identical message: 'We are going to reduce headcount, earn less money and invest very cautiously,' " says Douglas Peta, market strategist at J. & W. Seligman. "While efforts by policymakers to thaw credit markets are gaining traction, it appears we are headed for a pretty sharp global recession." The White House said President Bush will host an international financial summit Nov. 15 to discuss the crisis response and future reforms.

A sign of a worldwide slowdown was evident in the steep fall in the price of commodities, such as oil, which plunged $5.43 a barrel to $66.75. Analysts speculated that hedge funds, which have been big investors in commodities, were again forced to sell to raise cash to meet investor redemption requests and margin calls. Mutual funds trying to raise cash in order to meet sell requests from individual investors were also blamed for the late drop.