Investors: Dow in midst of correction
Fears of a credit squeeze and a souring U.S. economy pushed the Dow Jones industrial average into a full correction.
The 1.83 percent decline Monday sent the Dow 10 percent below its peak in October, The Wall Street Journal reported Tuesday. In contrast, prices of U.S. Treasury bonds moved up as investors sought the bonds' relative safety.
The Dow's correction basically acknowledges that the time in which banks "were virtually giving away money" is gone, one trader told the Journal.
"I think you will see a basic pullback in the willingness for banks to lend on all fronts," said Robert Albertson, chief strategist at Sandler O'Neill & Partners investment firm.
The Federal Reserve in New York said it would extend terms for loans to its Wall Street bond dealers. Its goal with the longer period -- up to six weeks instead of the usual two -- would help ensure banks have cash on hand for year-end lending needs. The Fed's move follows a similar action by the European Central Bank.
"If we get through to January without serious financial disruptions, we should be able to avoid a recession," said Lou Crandall, chief economist at Wrightson Associates. // Copyright 2007 by United Press International
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