U.S. Stocks Drop on Economic Data, Rising Bank Rates

U.S. stocks dropped for a second day as a jump in borrowing costs and reports showing a worsening economy spurred concern that the government's $700 billion bank bailout plan won't be enough to stimulate growth.

Caterpillar Inc., Alcoa Inc. and Deere & Co. tumbled more than 8 percent as three-month bank lending rates climbed to the highest since January, while the government said factory orders declined more than forecast. General Electric Co. lost 9.7 percent after selling $12.2 billion in shares at a discount. Monsanto Co. slid 16 percent, its steepest loss since going public in 2000, after Merrill Lynch & Co. said slumping demand will hurt farm companies.

The Standard & Poor's 500 Index slid 46.74, or 4 percent, to 1,114.32. The Dow Jones Industrial Average lost 348.54, or 3.2 percent, to 10,482.53. The Nasdaq Composite Index slipped 4.5 percent to 1,976.72. Fourteen stocks retreated for each that rose on the New York Stock Exchange.

Canada's main stock index slid to the lowest in more than two years, led by a record drop in raw- material shares, as tighter credit, rising unemployment and lower home prices threatened to tip the U.S. into a recession. The Standard & Poor's/TSX Composite Index fell 5.9 percent to 11,018.53 at 3:03 p.m. in Toronto and dropped earlier to 10,945.81, the lowest intraday level since June 14, 2006.

Brazilian stocks plunged, sending the Bovespa index toward its biggest weekly decline in six years, as commodity prices slid and Citigroup Inc. told investors to sell consumer shares on concern the credit crisis will choke off borrowing and spending. The Bovespa index dropped 4,515.69, or 9.1 percent, to 45,282.96 at 2:42 p.m. New York time, as only one of the 66 shares in the benchmark gained.

The rally on London equity markets was erased on Thursday, as optimism about the political prospects of the US government’s $700bn rescue package waned. The FTSE 100 closed 89.3 points lower at 4,870.3 in afternoon trade after briefly spending time back over the 5,000 mark.

Asian stocks fell, led by automakers and commodity producers, after U.S. car sales plunged the most in 17 years and the Senate's approval of a $700 billion rescue package failed to ease concern the global slowdown will worsen. The MSCI Asia Pacific Index dropped 1.4 percent to 107.47 as of 7:22 p.m. in Tokyo, taking this year's decline to 32 percent. Markets in Malaysia, Indonesia, India and Pakistan are shut for holidays today, while China is closed all week.

Japan's Nikkei 225 Stock Average declined 1.9 percent to 11,154.76. Komatsu Ltd. and Hitachi Construction Machinery Co., Asia's two largest excavator makers, led declines after U.S. manufacturing contracted more than forecast, stoking concern demand for their products may slow.

TradingEconomics.com, Bloomberg.com
10/2/2008 1:22:53 PM