NEW YORK (MarketWatch) -- Wall Street shares thudded lower Wednesday, with Dow suffering its fifth-largest decline yet this year, amid persistent financial woes, a drooping dollar, surging oil and General Motors Corp.'s largest-ever quarterly loss.
"It's very difficult to make an argument for stocks today," said Art Hogan, chief market strategist at Jefferies & Co.
The dollar tumbled to new lows after a top Chinese official called for China to diversify parts of its vast foreign-currency holdings into other currencies like the euro, which hit a fresh high against the greenback -- climbing as high as $1.4730.
This is an important detail to remember. China has a huge number of dollars, gained from all the Chinese manufactured products that are sold in the U.S. Because China has all these dollars, they've been investing into U.S. Treasuries, to the amount of around US$1.07 trillion. I'm thinking that the Chinese are starting to get worried about their huge holdings in the U.S. dollar, and want to diversify. But if the Chinese sell their dollar holdings, the value of the dollar continues to drop, and the value of their investments in U.S. Treasuries will also drop. It is madness.
Now let's get into the Dow. From Marketwatch:
The Dow Jones Industrial Average fell 360.9 points, or 2.6%, to 13,300.0, with all of its 30 components ending in the red, led by insurance giant American International Group Inc. down 6.7% ahead of its quarterly report.
Others financial stocks also fell, as a bearish outlook from Washington Mutual Inc. and speculation that Morgan Stanley would post large subprime-related losses weighed on the sector.
The S&P 500 shed 44.65 points, or 2.9%, to 1,475.62, while the Nasdaq Composite
dropped 76.42 points, or 2.7%, to 2,748.76.
This was a bad day to be on the stock market. We've got China talking about selling U.S. dollars, GM posting their $39 billion accounting loss, the subprime mortgage scandal threatening losses from Washington Mutual and Morgan Stanley, and finally there is still the high energy prices of oil sitting at around $96 a barrel. In fact, oil went as high as $98.62 a barrel, before settling down at $96.37 a barrel.
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