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wallstreet: Fears of recession send US stocks tumbling

NEW YORK – US STOCKS tumbled on Friday, dragging the Dow to its worst three-day start to a year since the Great Depression, as a sharp rise in the unemployment rate heightened fears that the economy is heading into a recession.

Technology shares were the worst performers in a broad-based decline after chipmaker Intel Corp skidded 8.1 per cent on concern that businesses are unlikely to upgrade computer equipment in the face of a slowdown.

The Nasdaq fell 3.77 per cent, bringing the index to its worst three-day kick-off to a new year since it was created in 1971.

The US Labour Department reported that job creation had nearly ground to a halt last month. Unemployment rose to a two-year high of 5 per cent.

‘The payroll numbers are showing that we don’t have the jobs, and if you don’t have job income, you don’t have consumers doing any spending,’ said Mr Gary Shilling, president of A. Gary Shilling & Co of Springfield, New Jersey. ‘I don’t think there’s much question we’re in a recession now.’

In a sign that investors were hunkering down for hard economic times, the market’s rare gainers were from defensive sectors such as electric utilities, drugmakers, food and other products seen as essential to daily life.

The Dow Jones Industrial Average was down 256.54 points, or 1.96 per cent, at 12,800.18. The Standard & Poor’s 500 Index was down 35.53 points, or 2.46 per cent, at 1,411.63, and the Nasdaq Composite Index was down 98.03 points, or 3.77 per cent, at 2,504.65.

The Nasdaq’s decline brought it to a six-day losing streak, the first time since August that it had marked six straight losses. The index is now off more than 10 per cent from its 52-week closing high set on Oct 31.

The S&P had its worst three-day year open since 2000.

Intel, the world’s top semiconductor maker, which was downgraded by JP Morgan on Friday, fell to US$22.67 and was off more than 15 per cent since Wednesday.

Coca-Cola Co was the sole gainer in the 30-share Dow average, adding 0.2 per cent to US$61.85.

 

Source: Reuters (The Sunday Times 6 Jan 08)

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