NEW YORK (CNNMoney.com) -- The Dow plummeted more than 350 points Thursday as selling accelerated following a record surge in oil prices. The three major indexes took a beating right out of the gate after Goldman Sachs downgraded two key Dow components, and two tech leaders disappointed investors.
The Dow Jones industrial average (INDU) shed 358.41 points, or 3%, to close at 11,453.42. The last time the index was near that level was 21 months ago in September 2006.
The Dow lost more points Thursday than any other day this year except for Feb. 5, when the indicator lost 370.03 points.
Despite the major selloff, however, the market is not yet in "bear" market territory. A bear market is defined as a drop of at least 20% off the recent high. The Dow closed at 14,164.53 on Oct. 9, and ended Thursday down 19.1% from that peak.
In fact, the broader Standard & Poor's 500 (SPX) index was off 2.9% and the tech-heavy Nasdaq composite (COMP) declined 3.3% at the end of the day.
"We have a perfect storm of bad news today," said Art Hogan, chief market analyst at Jefferies & Co. "None of the news is surprising necessarily [but] it is surprising the magnitude of the response to news that should already have been baked into this market."
"Oil is a major factor, but it is not the only thing," said Harry Clark, founder and CEO of Clark Capital Management Group. "There is nothing good right now" in the news, Clark added. While oil hit a new record above the $140 threshold, oil prices are only part of a larger picture.
Market breadth was negative. On the New York Stock Exchange, losers topped winners by five to one on volume of 1.54 billion shares. On the Nasdaq, decliners beat advancers by four to one on volume of 2.32 billion shares.
Oil touches $140 a barrel: The stock selloff gained steam after crude oil soared to a new intraday record of $140.39 a barrel on the New York Mercantile Exchange Thursday afternoon.
Oil crossed $140 a barrel for the first time ever Thursday following reports that Libya may cut production and an OPEC official saying crude could hit $170 a barrel this summer. The dollar's decline against the euro added further upward pricing pressure to oil. Light, sweet crude for August delivery ended the trading day at a record settlement of $139.64 a barrel, up $5.09, on the New York Mercantile Exchange.
"Sustainable higher energy prices are a negative for everything on the marketplace," said Hogan. "There is nothing in the S&P 500 that is not affected by higher energy prices."
As oil prices have more than doubled in the past year, consumers have felt the pinch at the pump. "People worry a lot about the viability of the consumer with the money getting sucked out of their pocket for gasoline," said Bob Phillips, chairman and CEO of Walnut Asset Management. "Psychologically it casts a pall over the whole economy."
Oil hitting record high prices is nothing new. "People are coming to accept the fact that oil is really a weight on the market right now," said Russell Lundeberg, Jr., chief investment officer at Barrett Capital Management. Oil prices "compounds the other news" that already was pulling the markets down, he added.
Goldman downgrades GM, banks: Shares of General Motors (GM, Fortune 500) plunged 11% to the lowest level in more than 33 years, as analysts reacted to a Goldman Sachs downgrade and continued concerns about the automaker's competitiveness.
Goldman (GS, Fortune 500) also cut its ratings on U.S. investment banks to "neutral'' from "attractive" because of continued deterioration of the banking industry and the prospect of a lengthy recovery. It also added Citigroup (C, Fortune 500) to its "conviction sell'' list. Goldman shares were down 4%, while Citi was 6% lower.
"People are looking to see whether or not there is any bottom to the bad news in the financial sector," said Lundeberg. "And they obviously saw that it continued today."
Shares of Lehman Brothers (LEH, Fortune 500), Merrill Lynch (MER, Fortune 500), Morgan Stanley (MS, Fortune 500) and Jefferies Group (JEF) all lost ground.
"This is not the first time that people are aware that financials are under pressure - they have been under pressure all year long," said Phillips. The downgrade of MBIA (MBI) by S&P last week and then the downgrades by Goldman today "exacerbated the situation," he said.
Tech sector: Oracle (ORCL, Fortune 500) breezed past analysts' expectations in its fiscal fourth quarter late Wednesday, but gave more conservative guidance. Oracle shares were down 5%.
Research in Motion (RIMM) missed its target and guided down its profit forecast for the quarter. Shares of the BlackBerry maker were down more than 13%.
"There are some fears that Apple's new iPhone is going to cut into BlackBerry sales," said Hogan.
To see sectors that have otherwise weathered the storm, like technology and industrials, start to take a beating is evidence that we are near a bottom, according to Clark. "To see all the [stocks] that have held up get hit, marks the bottom," he said.
After the market close on Thursday, the Treo smartphone maker Palm (PALM) says it swung to a fiscal fourth-quarter loss as revenue declined sharply, falling below Wall Street's expectations.
UPDATE 6/26/08 UPDATE 6/26/08 UPDATE 6/26/08 UPDATE 6/26/08 UPDATE 6/26/08 UPDATE 6/26/08
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Pray for America that we are not one of three countries that will fall into turmoil and a reversal of fortunes as predicted by the Bizarre Star!
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UPDATE 6/27/08
Bear Scare on Wall Street
(Stock Market Is Down 19.9%)
Stocks tumble for the day and the week, with the Dow briefly falling into bear market, as oil prices set record and dollar slides.
By Alexandra Twin, CNNMoney.com senior writer
Last Updated: June 27, 2008: 5:57 PM EDT
NEW YORK (CNNMoney.com) -- Stocks slipped Friday, with the Dow briefly crossing into bear market territory, as record-high oil prices, a weak dollar and more financial market woes rattled investors for a second session.
The Dow Jones industrial average (INDU) lost over 100 points, or 0.9%, to end at a more than 21-month low. For a while, the selloff sent the blue-chip indicator to levels at least 20% below the fall highs, meaning it met the technical definition of a bear market. On Thursday, the Dow lost 358 points.
The broader Standard & Poor's 500 (SPX) index fell 0.4%, after hitting a 22-month low during the session.
The tech-heavy Nasdaq composite (COMP) fell 0.3%. The Nasdaq hit the technical definition of a bear market in March, falling 24% off its October highs, but has partially recovered since then.
Stocks posted bigger losses in midafternoon trade, but managed to close off the lows. All three major gauges fell for the week.
"You have a very jittery market that's vulnerable to whatever the news is on a given day," said James King, chief investment officer at National Penn Investors Trust.
Banks to see bigger losses. Merrill Lynch could post a $5.4 billion second-quarter writedown, Lehman Brothers said, due to its exposure to bond insurers. That's more than currently expected. Merrill (MER, Fortune 500) shares fell 1%.
In addition, AIG (AIG, Fortune 500) likely will take $5 billion in quarterly losses from its insurance units, which have been hit by $13 billion in writedowns, according to published reports. AIG shares slipped more than 2%.
Other banks declined, led by JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Wachovia (WB, Fortune 500).
THE LAST TIME THAT THE STOCK MARKET FELL 19-20 PERCENT WAS DURING THE GREAT DEPRESSION OF 1932
UPDATE 6/27/08
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It would now seem that we are using parallels from the Great Depression over and over:
“NEW YORK (MarketWatch) — U.S. stocks fell sharply Thursday with the blue-chip index enduring its worst June so far since 1930, (the Great Depression) and plunging to its lowest finish since Sept. 11, 2006, after getting slammed hard as crude soared to new highs and Goldman Sachs disparaged U.S. brokers and advised selling General Motors Corp.”
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"The Great Depression" -- The Stock Market was down 20%.
The Great Depression was a dramatic, worldwide economic downturn beginning in some countries as early as 1928. The beginning of the Great Depression in the United States is associated with the stock market crash on October 29, 1929, known as Black Tuesday and the end is associated with the onset of the war economy of World War II, beginning around 1939.
The depression had devastating effects in both the industrialized countries and those which exported raw materials. International trade declined sharply, as did personal incomes, tax revenues, prices, and profits. Cities all around the world were hit hard, especially those dependent on heavy industry. Construction was virtually halted in many countries. Farming and rural areas suffered as crop prices fell by 40 to 60 percent. Facing plummeting demand with few alternate sources of jobs, areas dependent on primary sector industries such as farming, mining and logging suffered the most.
The Great Depression ended at different times in different countries; for subsequent history see Home front during World War II. The majority of countries set up relief programs, and most underwent some sort of political upheaval, pushing them to the left or right. In some states, the desperate citizens turned toward nationalist demagogues - the most infamous being Adolf Hitler - setting the stage for World War II in 1939.