Market closes below 8,000 on news of business price cuts, fewer home starts; Fed anticipates further economic slowdown next year.
By Neil Irwin and David Cho
The Washington Post
Businesses cut prices at a record rate and builders started fewer new homes last month than anytime on record, according to new government data, as the outlook for the economy continues to dim.
An investor watches a market board indicating the Chinese stock market index in a trading house in central Beijing.(David Gray/Reuters)
The data helped spur another terrible day for the stock market, as did a projection of more hard times ahead by leaders of the Federal Reserve. A serious recession now appears all but assured.
The stock market fell another 5 percent, as measured by the Dow Jones industrial average, which closed below 8,000 for the first time in this bear market. New-home starts in October were the lowest since at least 1959, when the government began keeping data. The consumer price index plummeted by the most since that series of monthly data was started in 1947, as the economy slowed so abruptly that companies had to slash prices to sell products.
And Federal Reserve leaders released projections indicating they expect the economy to worsen significantly in the coming year. The most pessimistic of 17 Fed officials expects joblessness to rise to 8 percent at the end of 2009, which would be the highest in a quarter-century.
“We’re in the deep portion of the economic trough,” said Richard Yamarone, chief economist of Argus Research, explaining yesterday’s market sell-off. “So you have to expect a certain degree of negative sentiment, you almost have to expect doom and gloom at this point.”