Brutal day on Wall Street causes stocks to tumble

August 4, 2011 12:00:00 AM PDT
Thursday was a brutal day on Wall Street. All the gains made so far this year were wiped out and it didn't stop there. There were big losses in Asia Thursday night. Japan's Nikkei average is down almost 3.5 percent and Hong Kong's Hang Seng fell 4.5 percent.

This was the most alarming day yet in a sell off that's lasted two weeks. The Dow Jones Industrial Average lost 512 points as investors grew increasingly concerned about the global economy. Altogether, the Dow is down more than 1,300 points, since July 21st.

The day's 512-point point drop is the ninth worst for the Dow. It also marks the stock market's steepest dive since the financial crisis in 2008.

The anxiety gripped traders on Wall Street and those who work in the financial services industry in San Francisco. Michael Moscuzza works at a hedge fund and was monitoring the Dow all day.

"It was a brutal, the last hour. Every time you looked up it was down 20 points so it was tough, it was tough to see," said Moscuzza.

In total, some $940 billion worth of investor's wealth was wiped out since July 23rd, while the average 401k saw a loss of $11,736. Experts attribute the dip to the debt situation in Europe and fears of a weakening economy here at home.

"This is certainly a concern about it. I wouldn't use it as a predictor that it's coming, but it's certainly that people are concerned that recession is more likely today than say it was last month or two months ago," said David Amann, an Edward Jones financial advisor.

For many Bay Area companies, this is a wake-up call. While things have been looking up here, that's not the case elsewhere. Karen Vergura is CFO at ezRez, a software company in San Francisco.

"San Francisco we found to be very competitive hiring and so forth so things here for technology companies seem really good, but you look at the rest of the country, I mean Detroit unemployment and other places, it's definitely scary," said Vergura.

And in these scary situations, companies are less likely to hire and consumers less likely to spend, which is why the White House pushed lawmakers to get to work.

"Congress has the power to pass legislation that the president can sign. The actions that it can take could create more jobs right now," said White House spokesperson Jay Carney.

As is always the case, there's no telling how long the markets will be in this correction mode, but not everyone is panicking.

"I don't think the system is breaking down, I don't think banks are going to be failing. So, in that sense, I have a little bit more confidence than perhaps I might have had back in late '08," said financial advisor Bruce Rosen.

The direction of the market Friday could be determined by the government's unemployment report for July. It's expected to show weak job growth and an unemployment rate stuck at 9.2 percent.


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