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Context of 'February 23, 2009: Standard and Poor, Dow Jones Index Slide to 12-Year Low'

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The Royal Bank of Scotland (RBS) predicts “a full-fledged crash in global stock and credit markets over the next three months as inflation paralyzes the major central banks.” RBS credit strategist Bob Janjuah says, “A very nasty period is soon to be upon us—be prepared.” Bolstering Janjuah’s dire predictions, the RBS bank research team warns that the Wall Street equities index, Standard & Poor’s (S&P) 500 index is likely to fall by more than 300 points to around 1050 by September as “all the chickens come home to roost” from what the Daily Telegraph describes as “the excesses of the global boom, with contagion spreading across Europe and emerging markets. Such a slide on world [markets] would amount to one of the worst bear markets over the last century.” Janjuah also warned of the credit crisis in 2007. RBS predicts that Wall Street would rally a little in early July before quickly fizzling out. “Globalization was always going to risk putting G7 bankers into a dangerous corner at some point. We have got to that point,” Janjuah says. RBS debt market chief Kit Jukes says Europe will not be immune from the problems: “Economic weakness is spreading and the latest data on consumer demand and confidence are dire.” [Daily Telegraph, 6/19/2008]

Entity Tags: Bob Janjuah, Royal Bank of Scotland, Kit Jukes

Timeline Tags: Global Economic Crises

Global recession fears deepen as uncertainty regarding bank bailout plans drives negative investor sentiment on Wall Street. The Dow Jones index closes down 196.01 points, or 2.7% at 7169.66, the lowest since October 1997. The S&P 500 index loses 2.9% to 747.94, below its lowest close since April 1997. Investors initially welcomed reports that the Feds would convert an earlier investment in Citigroup into a large common stock holding, but enthusiasm faded as long-standing uncertainty about the government’s ultimate plan for banks resurfaced to pull indexes lower. European stocks also retreat, sending the Dow Jones Stoxx 600 Index to a new six-year low. It slides 0.9% to 175.29, dropping for a second straight day and closing at its lowest level since March 13, 2008. National benchmark indexes dropped in 15 of the 18 western European markets. [National Business Review, 2/23/2009]

Timeline Tags: Global Economic Crises

Official numbers released today show that the US economy fell by 6.2 percent during the fourth quarter of 2008. The decline was much worse than analysts initially predicted, sending US stocks spiraling lower. “Plunging exports and the biggest fall in consumer spending in 28 years dragged the annualized figure down from the preliminary estimate of 3.8 percent,” the BBC reports. As a whole, in 2008, the economy grew at its slowest pace since 2001, posting a mere 1.1 percent growth. The blue-chip Dow Jones industrial average dropped 119.15 points, or 1.66 percent, to 7,062.93. The broader Standard & Poor’s 500 Index fell 2.36 percent to 735.09, a 12-year low. US consumer spending accounts for nearly two-thirds of domestic economic activity, but fell by a rate of 4.3 percent in the final quarter—the biggest fall since the second quarter of 1980. This was a revision of the earlier figure of 3.5 percent. Rising unemployment, sliding home values, increasing numbers of repossessions, and the slumping value of investments indicate that many US consumers are hanging on to disposable cash. US exports fell at the sharpest rate since 1970 at an annual rate of 23.6 percent, down from 19.7 percent. Prior to the current economic crunch, exports supported the economy. “It shows the weak state of the world’s largest economy,” says Matt Esteve, a currency trader at Tempus Consulting. “Latest GDP figures are just awful and illustrates the weak state of the world’s largest economy.” Boris Schlossberg, director of currency research at GFT Forex, adds, “There is doom all over,” but predicts that the dollar would not weaken too much against the euro since “there’s no good news on the other side of the Atlantic, either.” [BBC, 2/27/2009]

Entity Tags: GFT Forex, Dow Jones Industrial Average, Matt Esteve, Standard & Poor’s, Tempus Consulting, Boris Schlossberg

Timeline Tags: Global Economic Crises

The World Bank predicts a 2.9 percent contraction in the global economy and adds that unemployment and poverty will continue to rise in developing nations in 2009. The revised previous estimate of a 1.7 percent decline causes a slide in US and European stocks and commodities. Three months ago, the World Bank issued a new estimate of 2 percent in 2010. Although the S&P 500 remains up 33 percent from its 12-year low in March, since June 12, the index has fallen 5.1 percent. Last week, the S&P 500 lost 2.6 percent, as a turndown in crude oil wounded fuel producers and Standard & Poor’s rating agency downgraded 18 banks’ credit ratings. Speaking in Paris today, economics professor Nouriel Roubini—who predicted the current financial crisis as early as 2006—says the global economy could suffer another slump due to higher oil prices and increasing budget deficits. “I see the worry of a double whammy” because of energy costs and fiscal burdens, thus increasing the risk of a setback in the economic recovery. He says that oil might rise to $100 a barrel. The increase in the value of the dollar blunted the appeal of commodities as an alternative investment, and sent copper, gasoline and oil prices lower. Amid the resignations of two more board members, bringing the total of departing directors to seven since April, Bank of America stock falls 6.1 percent to $12.41, the bank’s steepest intraday decline since May 15. It is expected that at the end of their two-day meeting on June 24, Federal Reserve officials might announce that the US is showing signs of surfacing from the worst recession in 50 years, although, after their last meeting in April, they announced that the economy would “remain weak for a time.” It is anticipated that central bankers will keep the benchmark interest rate in the range of zero to 0.25 percent. [Bloomberg, 6/22/2009]

Entity Tags: World Bank, Bank of America, Nouriel Roubini, US Federal Reserve, Standard & Poor’s

Timeline Tags: Global Economic Crises

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