A look at what happened in major markets Thursday

AP News
Posted: Sep 22, 2011 7:24 PM
A look at what happened in major markets Thursday

Financial markets were whipped Thursday by fears that the world is heading for another recession. A look at what happened in some of the major markets:


Investors around the world dumped stocks. The Dow Jones industrial average fell as much as 527 points before closing down 391.01, or 3.5 percent, at 10,733.83. The Dow is down 16 percent from its 2011 high of 12,810.54. It is near its lowest close of the year _ 10,719.94, reached on Aug. 10.


The news was bad around the world. A manufacturing survey suggested that industrial production was slowing in China. FedEx said it is expecting a slowing of the world economy. And investors were still interpreting a statement from the Federal Reserve on Wednesday as indicating a full recovery in the U.S. economy might take years.


U.S. debt was one of the few investments in demand. The yield on the 10-year Treasury fell to 1.72 percent, the lowest since the Federal Reserve Bank of St. Louis started keeping daily records in 1962. That's down from 3.66 percent in February, when the economy was expected to show relatively good growth this year. The yield on the 30-year Treasury bond fell to 2.80 percent _ its lowest level since December 2008 when the U.S. was in the worst financial crisis and recession since the 1930s and the Federal Reserve cut the key short-term interest rate that it controls to a record low between zero and 0.25 percent to try to boost the economy.


Investors also bought short-term Treasury debt. The yields on one-month and three-month Treasury bills had negative yields during Thursday's trading, as they have often in recent weeks. When the yield is negative, investors are paying the government to hold their money. In effect, they're buying safety.


The Chicago Board Options Exchange volatility index known as the stock market's fear gauge rose 11 percent to 41.35. That's below its high close for the year, 48, on Aug. 8. The VIX began the year at 17.75. During the financial crisis of 2008, it closed above 89. When the index rises, it indicates that investors expect stocks to fall over the next month.


The dollar hit an eight-month high against the euro. At one point during trading, a euro was worth only $1.3384. That's a drop of more than 10 percent since May. Traders are buying dollars because they are seen as relatively safe when the global economy slows. The euro, meanwhile, has fallen on fears that Greece or another nation will run out of money, leading to a financial crisis and recession in Europe.


Gold fell $66.40, or 3.7 percent, to $1,741.70 an ounce. Analysts said that much of the selling came from big investors who needed to raise cash and who had made money from gold's sharp rise this year. Investors often buy stocks and other securities using borrowed money. When those investments fall, banks or brokerage firms often require additional collateral, a demand known as a margin call. Gold is still up nearly 23 percent this year. But it's down nearly 8 percent from a record of $1,891.90 on Aug. 22.


Silver plummeted $3.89, or 9.6 percent, to $36.57 an ounce. It was the worst drop for silver since Oct. 10, 2008, when it lost 10.7 percent. Like gold, the selling of silver was driven in large part by margin calls. But analysts said that silver had a harder fall because about half of its demand comes from industrial uses. Silver is still up 17.4 percent for the year.


Copper tends to rise and fall along with expectations for the global economy because it's widely used in industry. News that China's manufacturing is shrinking sent copper down 7.3 percent to $3.49 a pound. It is down 23 percent this year.


Oil is another commodity whose fortunes are closely tied to the economy. It fell $5.41, or 6.3 percent, to $80.36 on the New York Mercantile Exchange. It was the worst drop for oil since Aug. 8, when it fell 6.4 percent after Standard and Poor's downgraded the credit rating of the United States. Oil has dropped 29 percent from this year's closing high of $113.93 on April 29 _ when investors were expecting the economy to keep growing.