JPMorgan Chase & Co joined other financial firms and cut its forecast for economic growth during the fourth quarter. It’s now predicting growth of one per cent, down from an earlier forecast of 2.5 per cent.
That added to the recession fears. Investors reacted to the news from late Thursday that Hewlett-Packard Co. was planning to exit most of its consumer businesses, including PCs. HP fell 20 per cent to a six-year low as investors showed their misgivings about its plan to transform itself into a company that caters to corporations. The market rose in early trading, but some investors did not want to take the chance of holding stocks if bad news came out of Europe over the weekend.
So they began selling during the afternoon. European investors were also cautious—banking stocks fell near two-and-a-half-year lows, dragged down by rumours about banks’ potential losses on bonds issued by heavily-indebted governments. “These things usually break out over the weekend and then you have a mad dash Monday to react to them,” said Mike McGervey, the head of McGervey Wealth Management. The drop late in the day recalled the 2008 financial crisis. Then, many investors stepped up their selling in the afternoon out of fears about news that might break overnight. Or on weekends—Lehman Brothers failed on September 15.
The government took over mortgage companies Fannie Mae and Freddie Mac the previous weekend.
The Dow lost 172.93, or 1.6 per cent, and closed at 10,817.65. It was down four per cent for the week. Since July 21, right before the market began its plunge, the Dow is down 15 per cent. Companies that rely on an expanding economy for revenues fell. Caterpillar Inc, International Business Machines and Alcoa Inc each fell more than two per cent. The Standard & Poor’s 500 stock index fell 17.12, or 1.5 per cent, to 1,123.53. It was down 4.7 per cent for the week. All ten industry groups that make up the index fell. The Nasdaq composite fell 38.59, or 1.6 per cent, to 2,341.84. It was down 6.6 per cent for the week.