Ben Bernanke opened the door to further US interest rate cuts on a day that saw the Federal Reserve moving to bypass banks and lend directly to US companies in an unprecedented attempt to unfreeze the money markets - 18:47

Getty

Fed chairman Ben Bernanke: the US central bank will start buying commercial paper in a bid to assuage fears that the credit crisis will spread to non-financial companies and affect basic functions such as meeting payroll needs

Wall St down after Fed liquidity plan

Financials lead losses - 18:16

The Short View: Wall Street’s late bounce

Russia lends banks $37bn to stem crisis

Move follows steep falls in Moscow markets - 12:50

Full coverage: Russia’s financial fall-out

RBS and HBOS plunge on funding fears

RBS denies it asked government for capital - 17:18

Plan to recapitalise banks edges closer

Sullivan blames ‘mark to market’ for AIG’s woes

Accounting rule had ‘unintended effect’ - 15:38

Full coverage: Global financial crisis

GM cuts production in Europe

Credit crisis takes toll on car demand - 18:07

Pontiac breaks mould with small hatchback

AMD spins off plants in $8.4bn Abu Dhabi deal

New partnership to build $3.2bn manufacturing plant - 13:16

AMD sells digital TV chip unit to Broadcom

Oil prices recover above $90 a barrel - Oct-07

Australian rate cut supports Asian stocks - Oct-07

The Fed’s intervention in the commercial paper market, which is widely used by large companies to raise short-term finance, is designed to boost much-needed liquidity.

Yet financials overall, down 4.3 per cent, led the market lower as money markets remained in paralysis.

Bank of America lost 15.6 per cent to $27.19 after the bank became the first Dow component to disclose quarterly results for the new reporting season. After the close of the previous session, the bank said it would raise $10bn in capital and halve its dividend.

Morgan Stanley and JPMorgan fell 12.6 per cent to $20.54 and 4.5 per cent to $42.03 respectively.

Merrill Lynch slid 13.6 per cent at $20.91 after Wachovia widened its third quarter loss estimate from $1.03 to $6.12 a share.

For much of on Tuesday morning, the Dow Jones Industrial Average teetered around the psychologically significant 10,000 barrier breached in the previous session after a four-day run of heavy losses.

By midday in New York, the Dow stood 1.2 per cent lower at 9,837.38 while the S&P 500 was 1.6 per cent down at 1,039.93. The Nasdaq Composite index fell 1.8 per cent to 1,828.52.

In technology, Google fell 1.4 per cent to $365.80 after Stifel Nicolaus cut its price target on the internet search group from $600 to $525.

IBM gave up 2.3 per cent to $98.31 after Barclays cut its recommendation on the stock from “overweight” to “equal-weight” due in part to its heavy exposure to the financial sector.

The energy, industrial and material sectors helped put a lid on the declines, up 1.3 per cent, 0.5 per cent and 0.8 per cent respectively.

Alcoa added 0.7 per cent to $18.24 ahead of its results due after the close. Analysts expect the aluminium producer, hit by lower prices, to report another quarterly profit decline.

An oil price recovery lifted energy stocks, such as Exxon Mobil and Chevron Corp, which rose 3 per cent at $79.67 and 1.1 per cent at $77.67, respectively.

First Solar fell 11.7 per cent to $141 and Sunpower fell 9.6 per cent to $50.03 after Goldman Sachs said solar power companies would be hurt as some governments cut subsidies for the technology. Goldman removed First Solar from its “conviction buy” list and cut its recommendation on both stocks to “sell”.

Yet the oil price rise hurt shares in some airlines. UAL Corp the parent company of United Airlines lost 14.3 per cent at $5.74 and Continental 12.8 per cent at $11.73.

In automotives, Ford and General Motors lost 13 per cent at $3.21 and 5.3 per cent at $8.03 respectively after the pair both warned they would cut output in Europe.

Illinois Tool Works lost 3.2 per cent to $37.85 after the manufacturer lowered third quarter and full-year forecasts due in part to weakness in North American industrial production.

Meanwhile in retail, Safeway rose 5.8 per cent to $23.04 on the back of better-than-expected third quarter earnings.

In consumer discretionaries, Walt Disney eased 2.9 percent to $27.45 after Merrill Lynch downgraded the the world’s biggest theme-park operator from “neutral” to “underperform”

The Chicago Board Options Exchange Volatility index, known as Wall Street’s fear gauge, fell 7.9 per cent, although at 47.92 it continued to indicate signs of extreme distress.

Tobias Levkovich, an erstwhile bullish analyst at Citigroup, cut his year-end forecast on the S&P from 1,475 to 1,200 due to “the anxiety generated by collapsing international stock markets, weaker economies around the world.”

Fed funds futures on Tuesday showed a 100 per cent probability that the Fed would cut interest rates at its meeting later in the month, and a 50 per cent probability it would cut rates by three-quarters of a percentage point.

Russia lends banks $37bn to stem crisis

By Catherine Belton in Moscow

Published: October 7 2008 12:50 | Last updated: October 7 2008 12:50

Russia said on Tuesday it would pump $37bn in long-term subordinated loans into state-controlled banks in a new measure to fight off a deepening financial crisis that has seen the steepest losses ever on the Russian stock exchange.

Dmitry Medvedev, the Russian president, announced the measure to pump five-year loans via the two biggest state banks, VTB and Sberbank, after an emergency meeting with the heads of the biggest state banks to discuss what he called “a large scale financial crisis”.

EDITOR’S CHOICE

Full coverage: Russia’s financial fall-out - Oct-01

Russia moves to arrest freefall in the markets - Oct-01

Timeline: Russia’s market turmoil - Sep-19

Moscow to lend $50bn to indebted business - Sep-30

Russian banks wary of foreign withdrawal - Sep-28

Lex: Russian lessons - Sep-19

Investors said the move would provide much needed longer term liquidity into the banking system and could revive money markets that have frozen in what one fund manager called a “vicious cycle of fear.”

Shares rose in Moscow and London, with the rouble-denominated RTS index up 2.9 per cent, but remained extremely volatile.

The emergency measure comes after the benchmark RTS posted its steepest loss in its 13-year history on Monday, plummeting 19.1 per cent, while the Micex fell 18.7 per cent.

The steep falls have sent stocks spinning to their lowest levels since 2004 and erased all the gains made since Russia unveiled a $100bn-plus rescue package on September 19 aimed at restoring investor confidence.

The state rescue funds so far have been mainly pumped in as short-term deposits in the biggest banks, but failed to break a growing crisis of confidence, exacerbated by the global financial turmoil and falling commodity prices. Banks had been hoarding the cash instead of lending it on, analysts said.

The liquidity crunch has provoked a wave of panic selling, exacerbated by fears that Russia’s richest oligarchs may be forced to dump stocks because they are unable to raise cash to meet margin calls as the value of collateral pledged for tens of billions of dollars in loans plummets.

Speculation that Oleg Deripaska, Russia’s richest man, could be forced to sell his 25 per cent stake in Norilsk Nickel, the world’s biggest nickel miner – which has been pledged as collateral for a $4.5bn loan – sent the London-traded stock down 44 per cent on Monday.

Mr Deripaska had last week been forced to divest his 20 per cent stake in Magna, the Canadian car parts maker, to creditors after a wave of margin calls. Mr Deripaska’s UC Rusal insisted in a statement on Tuesday that it would not sell the Norilsk stake.

Shares in Rosneft, the state-controlled oil major, lost 41 per cent on Monday on fears that the fall in value of its shares put it in breach of covenants on a $1.8bn loan. A person close to Rosneft on Tuesday denied this was the case.

Meanwhile Gazprom, the state-controlled gas giant, lost one quarter of its value on Monday.

“There is currently little rhyme or reason to trading in the Russian stock market,” Chris Weafer, chief strategist at Uralsib investment bank, wrote in a research note on Monday. “It is as if investors are aggregating the total sum of their fears concerning the global and domestic economies. Worst-case scenario, and then some.”

RBS and HBOS plunge on funding fears

By Michael Hunter

Published: October 7 2008 08:45 | Last updated: October 7 2008 17:18

Banks were once again under pressure in London on Tuesday amid worries about the health of the financial sector, but the broader market closed fractionally higher after a volatile session.

HBOS and Royal Bank of Scotland were the heaviest fallers – closing down 41.5 per cent to 94p and 39.2 per cent at 90p, respectively. The HBOS price represented a 50 per cent discount to the terms of the offer from Lloyds TSB. Shares in Lloyds closed down12.9 per cent at 225½p.

Sullivan blames ‘mark to market’ for AIG’s woes

By Stephanie Kirchgaessner in Washington

Published: October 7 2008 15:38 | Last updated: October 7 2008 15:38

Martin Sullivan, former chief executive of AIG, the insurance giant that was rescued by the US government, on Tuesday blamed a single accounting rule for the company’s travails.

In written testimony released before he was set to testify before Congress, Mr Sullivan said that “multiple actions by multiple parties” created the “unprecedented financial market disruption” that caused his firm’s near-collapse and eventual $85bn bail-out by the US Treasury.

GM cuts production in Europe

By John Reed in London and Bernard Simon in Toronto

Published: October 7 2008 18:07 | Last updated: October 7 2008 18:07

General Motors is cutting production at most of its 10 manufacturing plants in Europe in a stark sign of the growing toll the credit crisis is taking on demand in the real economy. GM said on Tuesday it was halting production or cutting shifts at the plants for between 10 days and three weeks in response to lower sales of its Opel, Vauxhall and Saab cars.

“The financial crisis is affecting the vehicle market,” Opel said.

AMD spins off plants in $8.4bn Abu Dhabi deal

By Chris Nuttall in San Francisco

Published: October 7 2008 07:47 | Last updated: October 7 2008 13:16

Advanced Micro Devices plans to spin off its chip plants and receive a lifeline of up to $8.43bn from Abu Dhabi as it struggles to compete with its larger microprocessor rival Intel.

AMD confirmed on Tuesday a long awaited ”asset-light” strategy that will relieve it of the burden of trying to maintain manufacturing parity with its Silicon Valley neighbour.

Fed Announces Plan to Buy Short-Term Debt

By EDMUND L. ANDREWS and MICHAEL M. GRYNBAUM

Published: October 7, 2008

WASHINGTON — The Federal Reserve announced a radical new plan on Tuesday to jump-start the engine of the financial system.

Skip to next paragraph

Enlarge This Image

Fred R. Conrad/The New York Times

By the end of trading Monday at the New York Stock Exchange, stocks had tumbled 3 percent.

Multimedia

Graphic

Fears of Banking Instability and Global Recession

Back Story with The Times's Vikas Bajaj (mp3)

The Fed said in a statement that it would begin to buy large amounts of short-term debt in an effort to stimulate the credit markets, which have all but dried up.

Under the program, the Fed said that it would buy the unsecured short-term debt that companies rely on to finance their day-to-day activities. “This facility should encourage investors to once again engage in term lending in the commercial paper market,” the Fed said Tuesday in a statement. “An improved commercial paper market will enhance the ability of financial intermediaries to accommodate the credit needs of businesses and households.”

While the move will put more taxpayer dollars at risk, it underscores the growing sense of urgency felt by policy makers in a climate where lending has stalled. The Commercial Paper Funding Facility, “will complement the Federal Reserve’s existing credit facilities to help provide liquidity to term funding markets,” the Fed statement said.

The Fed said it was creating a new entity to buy three-month unsecured and asset-backed commercial paper directly from eligible companies. It hopes to have the program running soon.

Also on Tuesday, European Union finance ministers gathered in Luxembourg to seek common ground to buttress the continent’s banking system in the face of the financial crisis. Despite proposals from France and Italy, the European Union has eschewed any common fiscal approach to the crisis, mainly because Germany refuses to be drawn into a scheme for fear of being burdened with the costs of rescuing non-German banks.

The finance ministers more than doubled the minimum level of guarantees for bank deposits in member countries, to 50,000 euros ($68,000), on Tuesday as they battled to shield the Continent’s banks from turmoil and build a measure of confidence in its battered financial system.

The Fed’s plan to buy commercial paper was formulated amid cascading losses in global stock markets, as the banking crisis spread across Europe and investors feared dire consequences for the world economy. The Dow Jones industrial average fell as much as 800 points before a late recovery, finishing down 369.88, below 10,000 points for the first time since 2004.

Even before bankers on Wall Street reached their desks on Monday, European stocks were plunging. The Russian stock market dropped 19.1 percent, the biggest decline since the fall of the Soviet Union. Major indexes in London and Frankfurt lost more than 7 percent; stocks in Paris fell by 9 percent. Stocks in Latin America and other emerging economies took their worst collective tumble in a decade.

Volatility reached the highest level in two decades, and oil prices fell below $90 for the first time since February.

The contagion moved to Asian with the Nikkei index of Japanese stocks closing down 3 percent and the Hang Seng index of stocks in Hong Kong fell 4.9 percent. But shares rebounded Tuesday morning in Europe, with the FTSE up 1.2 percent in London, the CAC 40 was up 1.7 percent in Paris and the DAX in Frankfurt was slightly higher.

Investors around the world are worried about what the evaporation of credit will do to an already-weakened global economy.

“There is a growing recognition that not only has the credit crunch refused to be contained, it continues to spread,” said Ed Yardeni, an investment strategist. “It’s gone truly global.”

In the United States, consumers appear to be significantly curbing spending; last month, employers cut more jobs than any month in five years. The $6 decline in oil prices, which settled at $87.81 a barrel, stemmed in part from fears that demand will slacken in the face of a deteriorating economy.

The Fed plan is intended to renew the flow of credit on which the economy depends. Under its plan, the central bank would buy unsecured commercial paper, essentially short-term i.o.u.’s issued by banks, businesses and municipalities.

The market for that kind of debt has all but shut down in the last week, with many major corporations unable to borrow for longer than a day at a time, as banks become more fearful of giving out cash. The volume of such debt totaled about $1.6 trillion as of Oct. 1, down 11 percent from three weeks earlier.

These credit fears persisted over the weekend despite the $700 billion bailout package that Congress approved last week.

Mr. Andrews reported from Washington and Mr. Grynbaum from New York. Vikas Bajaj contributed reporting.

Past Coverage

A.I.G. Uses $61 Billion of Fed Loan (October 4, 2008)
As Economy Weakens, Federal Reserve Officials Consider Lowering Rates (October 3, 2008)
THE RECKONING; As Credit Crisis Spiraled, Alarm Led to Action (October 2, 2008)
Reaching for the Right Levers to Ease an Anxious Situation (September 30, 2008)

An online stock market for sports fans

Also in Tech:

Ads by Google

what's this?

The "27% Bank Account"
Secret "Bank Account" Makes 27% a Year for the Last 13 Years
www.DailyWealth.com/Income_Report

COBUS GROUP
Offshore & UK Companies Offshore & Bank accounts
www.cobus.net

International Financing
Land Acquisition and Development $10 Million USD Min, No Maximum
www.aspencapitalmtg.com

Inside NYTimes.com

Television »	N.Y. / Region »	Opinion »	Science »	Opinion »	World »
Message to Your Grandma: Vote Obama	A Dead Language That’s Very Much Alive		Audubon’s Species: Bird Art, in All Its Glory	Op-Ed: Questions for the Presidential Candidates	Tribe’s Charge of Neglect Is Shrouded by Politics

Companies Economy International Corrections Pre-market Trading After-hours Trading Winners/Losers/Actives Bonds Currencies Commodities World Markets Money Magazine Real Estate Mutual Funds Taxes Ask the Expert Money 101 Autos Loan Center Best Places to Live Ask the Expert Millionaires in the Making Ultimate Guide to Retirement Retirement Calculators Best Funds Ask the Mole Best Places to Retire Personal Tech Big Tech Blog Techland Blog Sectors and Stocks Fortune 500 Techs Tech Talk 100 Best Places to Launch Ultimate Resource Guide Small Biz Makeovers FSB 100 Ask & Answer Fortune 500 Technology Investing Management Rankings Main Create Portfolio Edit Portfolio Create Alerts Edit Alerts

Complete Coverage SPECIAL REPORT AMERICA'S MONEY CRISIS

Bernanke: Economic outlook weaker

Fed chairman says financial crisis will dampen economy well into 2009 and hints at future rate cuts; says recent actions by Fed, Treasury should help economy recover.

EMAIL | PRINT | SHARE | RSS

Subscribe to Economy

feed://rss.cnn.com/rss/money_news_economy.rss

Paste this link into your favorite RSS desktop reader

See all CNNMoney.com RSS FEEDS (close)

Last Updated: October 7, 2008: 1:59 PM ET

AMERICA'S MONEY CRISIS

NEW YORK (CNNMoney.com) -- Federal Reserve Chairman Ben Bernanke predicted that the global financial markets crisis is likely to restrain the economy well into next year and signaled that the Fed may be getting ready to cut interest rates.

But he said he believes the unprecedented steps taken to have the Treasury Department and the Fed intervene in financial markets were done in time to prevent more expensive and permanent damage to the nation's leading financial institutions.

In a speech before the National Association of Business Economics in Washington on Tuesday, Bernanke said the threat of inflation has receded recently, while the economy has continued to weaken. This could be interpreted as a sign that the central bank might be preparing to lower its key fed funds rate soon.

"Overall, the combination of the incoming data and recent financial developments suggests that the outlook for economic growth has worsened and that the downside risks to growth have increased," he said.

"In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate," he added.

The fed funds rate is the primary lever the central bank uses to influence the economy. Lower rates can help reduce the borrowing costs for businesses and consumers on a wide range of loans, including business lines of credit, credit card rates and home equity loans. These cheaper loans can increase economic activity.

But lower rates can also add to inflation pressures since they tend to reduce the value of the dollar and make imported goods, most notably oil, more expensive.

The Fed cut rates seven times between September 2007 and this April, but held them steady at 2% at its past three meetings due to inflation concerns.

The Fed's next scheduled meeting is Oct. 28-29. Some investors and economists have suggested the current financial crisis could lead the Fed to announce an emergency rate cut ahead of that meeting.

Bernanke again pointed to falling housing prices as a primary cause of the problems in the nation's financial sector. But he warned "the slowdown in economic activity has spread outside the housing sector."

And he added that tighter credit conditions mean that the economic weakness is likely to continue into 2009.

"The heightened financial turmoil that we have experienced of late may well lengthen the period of weak economic performance," he said.

Bernanke defended the $700 billion bailout package passed by Congress and signed into law last week. The rescue plan will allow Treasury to buy damaged mortgage-backed securities from financial firms.

Bernanke said the bailout, as well as moves by the Fed this week to inject hundreds of billions more into the banking system and buy commercial paper used by many businesses to finance their day-to-day operations, were necessary actions to take at this time of economic stress.

"These are momentous steps, but they are being taken to address a problem of historic dimensions," he said.

And he predicted that the efforts would be successful in returning the economy into a growth path.

"The steps being taken now to restore confidence in our institutions and markets will go far to resolving the current dislocations in the markets," he predicted. "I believe that the bold actions taken...together with the natural recuperative powers of the financial markets, will lay the groundwork for financial and economic recovery."

First Published: October 7, 2008: 1:10 PM ET

The Fed's unlimited business loan bailout

The Fed pumps billions more to banks

Most Americans see depression as likely

Features

FULL COVERAGE

AMERICA'S MONEY CRISIS

Outlook gloomy

Fed chairman Bernanke says financial crisis will keep economy weak into next year and hints at future rate cuts. more

• Read the text of Bernanke's speech

Exhausted markets slide again

Dow falls 300 as Bernanke speech, Fed plan don't reassure. more

• Dollar sinks on rate-cut hope

• Credit eases slightly

• Pensions lose $2 trillion

• Fed bails out business loans

• AIG's ex-CEOs blamed for crisis

• FDIC to bolster deposit fund

• EU to guarantee private savings

• Surviving a 401(k) freak out

• Where pros are putting their cash

• Making money in this market

Markets	Last	Change
Dow Jones	9,597.88	-357.62 / -3.59%
Nasdaq	1,783.20	-79.76 / -4.28%
S&P 500	1,013.99	-42.90 / -4.06%
10-year Bond	104 11/32	Yield: 3.47%
U.S.Dollar	1 euro = $1.360	0.011

October 7, 2008 2:14 PM ET

Company	Price	% Change
Morgan Stanley	15.70	-33.19%
Yrc Worldwide Inc	5.00	-29.28%
Ual Corp	5.06	-24.48%
Merrill Lynch & Co., Inc	18.52	-23.47%

Oct 7 2:06pm ET †

Exhausted markets slide again

Dow drops as much as 279 points as Fed credit plan fails to reassure investors. Bernanke comments add more worries.

EMAIL | PRINT | SHARE | RSS

Subscribe to Markets

feed://rss.cnn.com/rss/money_markets.rss

Paste this link into your favorite RSS desktop reader

See all CNNMoney.com RSS FEEDS (close)

By Alexandra Twin, CNNMoney.com senior writer

Last Updated: October 7, 2008: 1:41 PM ET

AMERICA'S MONEY CRISIS

Special Report

NEW YORK (CNNMoney.com) -- Stock declines accelerated Tuesday afternoon as investor enthusiasm about the Fed's plan to unfreeze credit markets faded and Chairman Bernanke sounded the alarm on the economy.

With 2-1/2 hours left in the session, the Dow Jones industrial average (INDU) had lost 225 points or 2.3%. The blue-chip average ended below 10,000 Monday for the first time in almost 4 years.

The Standard & Poor's 500 (SPX) index fell 2.6% and the Nasdaq composite (COMP) lost 2.8%. Both ended at multi-year lows Monday.

Credit markets remained stressed, but showed some improvement after the Fed move. Treasury prices tumbled, pushing the corresponding yields higher as investors shifted to stocks.

Stocks plunged 369.88 points on Monday, with the Dow losing as much as 800 points during the session, as the $700 billion bank bailout plan and European government attempts to prop up faltering banks failed to comfort panicky investors.

Stocks initially rose Tuesday on the Fed's latest plan, but gave up those gains by midmorning, turning lower.

"It's another step in the right direction, but it's hard to get too excited about this because nothing yet has worked," said Bill Stone, chief investment strategist at PNC Financial Services Group.

"Eventually, if they [the government] stack up enough things, something will work," he said.

He said that it's positive that the Fed and the Treasury are taking aggressive and creative approaches to handling the current crisis. However, people are exhausted after all that's happened and they are less willing to cheer a plan that won't kick in for some time.

Central bank Chairman Ben Bernanke, speaking in the afternoon, said that the economic outlook has worsened and the financial crisis will hurt the economy well into next year. He also implied that more interest-rate cuts are on the way. (Full story).

Stock declines accelerated following his comments.

Fed plan: The Federal Reserve said Tuesday it will buy commercial paper, short-term debt that companies use to finance daily operations, from individual companies. Panicky investors have been less willing to buy this kind of debt lately, making it hard for companies to get the money they need to operate.

The Fed move is aimed at creating a market for this kind of debt, ultimately loosening up the frozen credit markets. (Full story)

Businesses depend on the credit markets to function on a daily basis, and the absence of ready capital has stalled the broader financial system and hurts consumers.

The government has taken a number of dramatic steps of late to try to get the markets functioning properly again amid the housing collapse and subsequent credit crunch.

On Monday, the Fed made an additional $300 billion available to banks in return for a range of damaged assets, on top of another $300 billion already available. The Fed could expand that to $900 billion by the end of the year.

And on Friday, President Bush signed into law the $700 billion bank bailout, which involves the Treasury buying bad debt directly from banks in order to get them to start lending to each other again.

Company news: After the close Monday, Bank of America (BAC, Fortune 500) reported a steep drop in profit that was short of estimates and cut its dividend. The bank also said it will raise $10 billion through a stock sale and that the company will need to set aside money for bad loans through the coming year. Shares fell 18% Tuesday. (Full story)

Also late Monday, Wells Fargo (WFC, Fortune 500) and Citigroup (C, Fortune 500) both agreed to a legal standstill in their battle for Wachovia (WB, Fortune 500). (Full story)

AIG (AIG, Fortune 500) was in the spotlight Tuesday, in the second of several House hearings into what led to the current crisis. The government had to bail out the insurance giant with an $85 billion credit line last month to keep it from imploding.

On Monday, the House Oversight Committee questioned Richard Fuld, chief executive of Lehman Brothers, which went bankrupt last month.

A variety of bank stocks fell Tuesday, including Citigroup (C, Fortune 500), JP Morgan Chase (JPM, Fortune 500), Goldman Sachs (GS, Fortune 500), Merrill Lynch (MER, Fortune 500) and Morgan Stanley (MS, Fortune 500).

But the declines were broad, with 28 of 30 Dow components sliding. Besides the financials, other losers included Walt Disney (DIS, Fortune 500), GM (GM, Fortune 500), Pfizer (PFE, Fortune 500), Home Depot (HD, Fortune 500) and Wal-Mart Stores (WMT, Fortune 500), all of which lost between 4% and 5%.

Market breadth was negative. On the New York Stock Exchange, losers beat winners three to one on volume of 800 million shares. On the Nasdaq, decliners topped advancers by two to one as 1.5 billion shares changed hands.

Global markets: Markets overseas were mixed Tuesday, a day after taking a drubbing everywhere.

Australian markets rallied after the government cut short-term interest rates by a full percentage point, surprising investors. Asian markets ended lower.

European markets were mixed. Russian markets opened late, but managed gains after having been shut down Monday following a steep selloff. (Full story)

(Europe: The new Wall Street?)

Credit markets: Measures of bank nervousness remained at elevated levels Tuesday, but showed some improvement.

The difference between the 3-month Libor and the Overnight Index Swaps fell to 2.93% from a record high of 2.97% earlier in the day. The Libor-OIS spread measures how much cash is available for lending between banks and is used by banks to determine rates. The bigger the spread, the less cash is available.

But 3-month Libor, the rate banks charge each other to borrow for three months, rose to 4.32% from 4.29% Monday.

The TED spread, which is the difference between 3-month Libor and what the Treasury pays for a 3-month loan, fell to 3.35% after hitting an all-time high of 3.95% Monday.

The wider the spread, the more reluctant banks are to lend to each other rather than from the federal government. When markets are fairly calm, banks charge each other premiums that are not much higher than the U.S. government.

The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, rose to 0.97% from 0.44% late Monday, with investors looking for a slightly better return on their money. Last month, the 3-month bill skidded to a 68-year low around 0% as panicked investors fled stocks.

Treasury prices dipped, propelling the yields. The benchmark 10-year note fell 6/32, lifting the corresponding yield to 3.47% from 3.45% Monday. Treasury prices and yields move in opposite directions.

Oil and gold: U.S. light crude oil for November delivery rallied $1.39 to $89.20 a barrel on the New York Mercantile Exchange, after ending the previous session at an eight-month low.

COMEX gold for December delivery rallied $14.60 to $880.80 an ounce.

Other markets: In currency trading, the dollar slipped against the euro after hitting a 14-month high against the European currency on Monday. The dollar also slipped against the yen, giving up earlier gains. (Full story)

The price of gas decreased for the 20th consecutive day, according to a survey of credit card activity.

Worried about your retirement? Tell us your story

First Published: October 7, 2008: 10:51 AM ET

The accounting rule you should care about

The week that crushed Wall Street

How we got there: It's housing, stupid

Election 2008: The Candidates and your money

Ultimate retiring guide: 383 questions answered

Issue #1: America's Money

50 years of profit swings

Features

FULL COVERAGE

AMERICA'S MONEY CRISIS

Outlook gloomy

Fed chairman Bernanke says financial crisis will keep economy weak into next year and hints at future rate cuts. more

• Read the text of Bernanke's speech

Exhausted markets slide again

Dow falls 300 as Bernanke speech, Fed plan don't reassure. more

• Dollar sinks on rate-cut hope

• Credit eases slightly

• Pensions lose $2 trillion

• Fed bails out business loans

• AIG's ex-CEOs blamed for crisis

• FDIC to bolster deposit fund

• EU to guarantee private savings

• Surviving a 401(k) freak out

• Where pros are putting their cash

• Making money in this market

Markets	Last	Change
Dow Jones	9,597.88	-357.62 / -3.59%
Nasdaq	1,783.20	-79.76 / -4.28%
S&P 500	1,013.99	-42.90 / -4.06%
10-year Bond	104 11/32	Yield: 3.47%
U.S.Dollar	1 euro = $1.360	0.011

October 7, 2008 2:14 PM ET

Company	Price	% Change
Morgan Stanley	15.70	-33.19%
Yrc Worldwide Inc	5.00	-29.28%
Ual Corp	5.06	-24.48%
Merrill Lynch & Co., Inc	18.52	-23.47%