Wall Street, spooked by a slew of gloomy earnings reports out Wednesday, shrugged off the latest White House measures aimed at stabilizing global markets and instead pushed the Dow sharply lower. Major U.S. stock indexes plunged around 6 percent. The Dow Jones industrial average closed down 514 points, at 8,519 — recovering somewhat after diving 700 points.
World leaders will meet Nov. 15 in Washington to address the global financial crisis, the Bush administration announced.
Meanwhile, Hungary raised interest rates to defend its currency; Ukraine and Belarus were seeking help from the International Monetary Fund; and the White House, trying to wrestle with the biggest economic crisis in 80 years, announced a series of economic meetings among world leaders aimed at hammering out reform.
For days, the main concern had been a logjam in credit markets that had kept banks from making the workaday short-term loans that businesses rely on for such basic needs as meeting payroll.
Bleak Corporate Earnings
But just as worldwide measures to free up the credit markets began to get traction, investors turned their attention to the next economic storm front — a series of earnings reports that looked to forecast more rough weather ahead:
- Wachovia Corp., already being snatched up by Wells Fargo after getting hammered in the subprime mortgage meltdown, lost $23.89 billion in the third quarter.
- Profits at drugmaker Merck & Co. plunged 28 percent as the company said it would slash 7,200 jobs, 12 percent of its workforce.
- Boeing's earnings were down 38 percent after a machinists' strike plagued aircraft production.
Last week, Treasury Secretary Henry Paulson said the administration would buy $250 billion worth of bank shares to shore up balance sheets and promote new lending. On Tuesday, the Federal Reserve offered to help money market mutual funds that have been reluctant to lend for fear of a run on them by worried investors wanting to cash out their holdings.
"Clearly, we're going to have a number of difficult months ahead of us in terms of the real economy," Paulson said Tuesday in an interview on PBS' The Charlie Rose Show.
Nov. 15 Financial Summit Set
The latest sell-off on Wall Street came as the Bush administration said Wednesday that world leaders would gather on Nov. 15 in Washington to address the global financial crisis — the first in a series of planned meetings.
The November summit, to be held less than two weeks after the U.S. presidential election, would be an opportunity to discuss underlying causes of the financial crisis and to begin talking about possible reforms. The meetings would bring together so-called G-20 nations: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union.
"Having taken action on the banking system, we must now take action on the global financial recession," British Prime Minister Gordon Brown said Wednesday. He said the current crisis would very likely "cause recession in America, France, Italy, Germany, Japan and — because no country can insulate itself from it — Britain, too."
The summit announcement came as the economic turmoil was increasingly showing in developing nations that investors fear will have difficulty weathering the crisis.
Hungary raised interest rates by 3 points to defend its currency, the forint. Meanwhile, Belarus' central bank asked the IMF for help, and Ukraine said it expected the IMF to provide substantial financial aid next week.
The Associated Press contributed to this report.
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