Markets Deflate

It's like the $700 billion bailout never happened. That's the New York Times' take on a wild day on Wall Street that saw the Dow Jones industrial average drop nearly 445 points, or 5.6 percent, the Nasdaq 5 percent, and the S&P 500-stock index fall 6.7 percent, "breach[ing] its low from the last bear market and land[ing] back where it was in the spring of 1997, marking a 52% decline from its peak," writes the Wall Street Journal. Fresh fears about a global recession combined with a backlash against the Treasury Department's recent decision not to buy troubled mortgage-backed debt seem to have sparked yesterday's "new bout of fear" that saw investors stampede away from equities and to the safety of Treasury bonds (now trading at their highest level in 35 years).

Citigroup stock fell another 26 percent Thursday, its worst one-day percentage decline ever, as U.S. banks bore the brunt of the sell-off; it seems investors are more suspicious than ever of what toxic mortgages the financial sector remains lumbered with. Despite the assurance of Saudi Prince Alwaleed Bin Talal that he intends to increase his stake by $350 million, to 5 percent, from less than 4 percent, the bank has lost half its value in just four days, reports the NYT. So despite boasting a "very strong capital and liquidity position" in the words of one company spokesperson, Citi is being forced to consider "auctioning off pieces of the financial giant or even selling the company outright," the WSJ reports. Crazy. Citi isn't suffering alone. JPMorgan Chase saw its share prices tumble 18 percent, while Bank of America fell 14 percent, its lowest level since 1996. And while we're taking historical notes, shares in Goldman Sachs were trading below the $53 price, a low not seen since the day it first sold shares to the public in 1999.

As the banks tank so does the price of oil. Crude futures dipped below $50 a barrel for the first time since 2005 yesterday as traders anticipated a slowing of demand in the coagulating global economy. Frantic OPEC ministers will gather soon to rubber-stamp a cut in production, but even that is unlikely to stop a falloff that "is a testimony to the world’s dire economic straits," writes the NYT. With some analysts predicting a return to $30 a barrel, the paper posits: "The pillars that had pushed up the price of oil and other commodities seem to be crumbling all at once: the American consumer is in full retreat; the Chinese economy is sputtering; financial markets are collapsing; developing countries are trimming their energy subsidies."

Cheap oil (and resulting gas prices at the pump) is about the only silver lining the chief execs of the Big Three automakers can see at present. They returned to Detroit empty-handed and tailpipes between their legs, having been told by Democrats in Congress not to come back until they have a "detailed plan on how they would spend $25 billion in government aid," the Detroit News reports. The earliest that can happen is Dec. 2, and this further delay in securing a bailout "startled industry analysts, who said General Motors, the largest and weakest of the firms, may not be able to hang on much longer without federal aid," the Washington Post writes. Though Democrats still seem disinclined to let the Big Three fall into bankruptcy, even they fear a $25 billion bailout might just be a first installment, writes Business Week.

Finally, here's a little bit of charity to warm your heart, courtesy of Fannie Mae and Freddie Mac. The nationalized mortgage financiers announced Thursday they will suspend evictions and foreclosures during the upcoming holiday season as part of their pledge to increasingly impatient lawmakers to stem the tide of people losing their homes, the Washington Post writes. The grace period will extend from Nov. 26 to Jan. 9. After that, "seriously" delinquent homeowners are back on the street.