Dow Swings 1,000 Points recovers on ISDAI statement

U.S. stocks fell for an eighth straight day in a whipsaw session that sent the Dow Jones Industrial Average to its biggest point swing ever. The Dow posted the steepest weekly slide in the history of the 30-stock average and the Standard & Poor's 500 Index capped its worst week since 1933, as concern the financial crisis will drag the economy into a recession pushed Morgan Stanley and CBS Corp. down more than 20 percent and Exxon Mobil Corp. more than 8 percent. The Dow recovered from a 697-point tumble and rose as much as 322 points in the last hour as an industry group said the bankruptcy auction of Lehman Brothers Holdings Inc.'s debt won't worsen credit losses. ``At this point, investors are just focusing on getting through the day,'' said Alan Gayle, the Richmond, Virginia-based senior strategist at Ridgeworth Investments, which oversees about $70 billion. ``The markets are being driven by emotion and rumor.'' The S&P 500 slipped 10.7 points, or 1.2 percent, to 899.22. The Dow lost 128 points, or 1.5 percent, to 8,451.19. Both gauges extended their weekly drops to 18.2 percent and closed at the lowest levels in 5 1/2 years. The Nasdaq Composite Index added 4.39 points to 1,649.51. Eleven stocks fell for every 10 that rose on the New York Stock Exchange. Global Rout European and Asian benchmark indexes posted their worst weekly retreats on record as exchanges in Russia, Indonesia and Ukraine suspended trading in an effort to halt a global rout that has wiped out $25 trillion from global equities this year. Developing country stocks also posted a record weekly plunge, with the MSCI Emerging Market Index losing 21 percent, led by a 20 percent slide in Brazil's benchmark index and a 16 percent retreat in India. Comments from President George W. Bush and Italian Prime Minister Silvio Berlusconi did nothing to restore confidence in financial markets and slow the global rout. Officials from the Group of Seven nations gathered for talks in Washington this weekend to discuss the crisis. The Dow twice recovered from drops of 500 points or more, first in the opening hour and again after 2 p.m. The afternoon rally pushed the 30-stock index as high as 8,901.28 before the gains were surrendered in the final minutes. The Dow had one bigger weekly retreat in its 112-year history, a 23 percent tumble in 1914 before the average was expanded to 30 stocks in 1928. Eight-Day Streak The S&P 500's eight-day losing streak is its longest since 1996. This week's declines pushed both the S&P 500 and Dow down more than 40 percent from their peaks last October. The S&P 500 ended the week trading for 17 times reported earnings of its companies, the cheapest valuation in more than a year. The market's ``fear gauge,'' as the Chicago Board Options Exchange Volatility Index is known, climbed to a fifth- consecutive record. The measure, which gauges the cost of using options as insurance against further stock declines, has tripled since the beginning of September. Almost 3 billion shares changed hands on the floor of the NYSE, more than twice the three-month daily average and the third-highest level since Bloomberg began compiling the data in 1988. The S&P 500 Energy Index, once the year's best-performing group, slumped 8 percent and lost 19 percent over the past two days. Oil fell below $80 a barrel for the first time in a year on concern the weakening economy will crimp demand. Credit Freeze Credit markets stayed frozen as the cost of borrowing in dollars in London for three months rose for a fourth consecutive day. The London interbank offered rate, or Libor, that banks charge each other for such loans climbed 7 basis points to 4.82 percent today, a high for the year, the British Bankers' Association said. The late-day rally in financial shares came after the International Swaps and Derivatives Association Inc. said Lehman's debt had ``little or no'' unanticipated costs and didn't cause any firms to fail. Sellers of credit-default protection on bankrupt Lehman's debt will have to pay holders more than 91 cents on the dollar after an auction today, setting up the biggest-ever payout in the $55 trillion market. The New York Stock Exchange and Nasdaq Stock Market may propose a temporary ban on short sales for individual stocks that plunge as regulators seek to rein in short-selling, according to three people who have seen a draft of the rule. The plan, which may be submitted as soon as today, would require a stock that closes down more than 20 percent be protected from short sellers for the following three days, the people said. ``The problem is the rules of valuation no longer exist,'' said Pierre-Yves Gauthier, founding partner of Alphavalue SAS in Paris. ``It's best to remain cautious. The economic slowdown is here. A recession could be heavy.''