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    Print Services: Site Web Search powered by YAHOO! SEARCH (From the last 12 hours) (From the last 12 hours) Powered by Subscribe to RSS headline updates from: Powered by FeedBurner » Top Classifieds Font Resize Bailout fails to soothe markets; global gloom deepens By Brandon Bailey Mercury News Article Launched: 10/06/2008 06:09:07 PM PDT Click photo to enlarge Trader John Santiago leans on a phone post on the New York Stock Exchange floor, Monday Oct. 6, 2008. Wall Street suffered through another extraordinary and traumatic session Monday, with the Dow Jones industrials plunging as much as 800 points _ their largest one-day point drop _ before recovering to close with a loss of 370. (AP Photo/Richard Drew) Today's Market Related Stories Oct 7: Oct 6: The federal government's $700 billion plan to bail out the financial industry wasn't enough to save Wall Street from taking another severe tumble Monday amid growing signs that the economic recession is spreading around the globe. Tech stocks were hit hard: Silicon Valley powerhouses like Oracle and Hewlett-Packard saw their shares decline as analysts warned of a global softening in software and hardware sales. While the Dow Jones industrial average fell below 10,000 for the first time in four years, closing at 9,955.50, the tech-heavy Nasdaq Composite Index sank to 1,862.96, also its lowest point since 2004. "Investors are realizing that the current credit crisis is really beyond the control" of individual governments, said California State University economist Sung Won Sohn. "It's no longer an American problem, but a global problem. It really has spread like wildfire." Monday was the first full day of trading since Congress enacted and President Bush signed the bailout legislation Friday. But over the weekend came news that several European financial institutions were floundering, followed Monday by more disheartening reports: German software giant SAP — which competes with Oracle — disclosed a "sudden and unexpected" drop in sales to business customers last month. The Conference Board, a major American business group, said U.S. unemployment is likely to worsen. And a Citibank analyst reported several chip companies Advertisement may not make their sales projections, amid signs that consumers are scaling back spending plans for the holiday season. Late in the day, the market recovered some of its losses. The Dow, which had fallen 800 points, started to climb. Still, it closed down 370, and it was clear that last week's government action was at most only a first step toward restoring confidence in the economy. "There's a lot of fear in the system right now," said Scott Anderson, a senior economist for Wells Fargo. "We didn't get the confidence boost we were looking for. Investors looked at the current economic and financial situation and saw that we're in for a deeper recession." That's not to say the bailout plan won't help. "Just getting some of that funding out there" should help ease the credit crunch that is bedeviling many companies, said Helen Popper, associate economics professor at Santa Clara University. But at the moment, she agreed, consumers and investors are reacting to a chorus of bad news. For the tech sector, several negative factors came into play. Some of Silicon Valley's largest companies, including HP, Oracle, Adobe and others, have hardly felt the impact of the U.S. economic slowdown in part because much of their revenue comes from overseas. But in recent days, governments across Europe have been forced to take steps to prop up their banks. Stock markets fell Monday in Europe, Asia and South America, leading officials to temporarily halt trading in Russia, Brazil and Peru. The widening downturn in those markets could lead to a drop in foreign sales for U.S. companies, said Sohn, who teaches at Cal State's Channel Islands campus. Germany's SAP, which sells business software to companies around the world, blamed a spreading economic crisis for its preliminary announcement Monday that third-quarter earnings will fall below its own projections. Shares of Oracle, which competes with SAP in some of the same markets, fell more than 6 percent. Other tech companies saw their stock prices decline after analysts at Citigroup and other Wall Street firms lowered their estimates for the software and semiconductor sectors. Apple, which suffered a major decline a week ago, was one of the few major tech companies that saw its share price rise — by 1.1 percent. But eBay fell 5.5 percent after announcing plans to cut more than 1,000 jobs. Even powerhouse HP saw its stock value drop 4.8 percent after at least one analyst lowered his earnings estimates in the face of "deteriorating outlook for PC shipments." Several researchers have warned that consumer spending for electronics and other goods is likely to suffer this holiday season. "It's sort of a reflexive recoiling. People are starting to make preparations for much tougher times," said Paul Carton, who conducts surveys of business and consumer spending for the ChangeWave research firm. "Consumers are pulling back," agreed Wells Fargo's Anderson, who said he believes the "mild recession" of the past year will become a "deeper downturn" through the end of 2008 and into next year. Contact Brandon Bailey at or (408) 920-5022. Font Resize Comments We are pleased to let readers post comments about an article. Please increase the credibility of your post by including your full name and city in the body of your comment. 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