Thursday was a day of massive stock market falls in Europe and the US of a kind not seen since the last economic downturn, traders said the atmosphere was reminiscent of the banking crisis of October 2008. Wall Street endured one of its worst days since the height of that crisis, with the Dow Jones Industrial Index closing more than 500 points or 4.3% lower at 11,383 in heavy volume, as it resumed a two-week streak interrupted only briefly on Wednesday. It was the biggest single-day loss since 2008.
Traders said concerns over the United States’ economic growth are accelerating the decline in share prices. Investors were said to be tensely awaiting the coming US labor market report on Friday. Many are assuming it will deliver further disappointing news. “If the situation on the markets in recent days was demoralized, then after yesterday’s losses on the US markets, it is moving into the direction of panic,” one trader said. Another contributing factor affecting investors was an unsuccessful effort by the European Central Bank to reassure the markets which instead ended up spooking investors. The bank intervened with a show of support to buy bonds of some smaller countries, but not Italy and Spain, whose mounting troubles have come into the spotlight. This was taken as a sign that the recent rescue packages by Europe could soon be overwhelmed by the huge debt burdens in those two countries.
Washington’s reaction to the market’s tumble was muted. The Treasury Department said it did not plan to issue any statements or provide officials to comment.“Markets go up and down,” said the White House spokesman, Jay Carney. “We obviously are monitoring the situation in Europe closely.”
Friday the Labor Department reported that employers added 117,000 jobs for July which was better than the 85,000 net new jobs that was forecast. The unemployment rate dropped slightly, from 9.2 percent to 9.1 percent. The labor market numbers may have brought a sigh of relief to many traders, but it was not enough to provide much comfort to those who have been waiting for the recovery to kick into high gear.