Panic

Last week, the U.S. financial markets tanked on recession fears. The Dow and the Nasdaq fell 4%, the S&P fell 5.4% and the Russell fell 4.7%.

This week isn't expected to be any better, and after European and Asian stocks got hammered Monday with the worst losses since 9/11 and Asian stocks continued to tank on Tuesday, things are really getting scary:

LONDON (Reuters) - World stocks nosedived and demand for safe-haven bonds and currencies soared on Monday as fears gripped investors that a deteriorating U.S. economy would drag others down with it.

The losses on the blue-chip stock indexes of Germany, Britain and France alone amounted to more than $350 billion, or roughly the size of the combined economies of New Zealand, Hungary and Singapore.

The Financial Times put it this way:

Global equities plunged on Monday as investor concerns over the economic outlook and financial market turbulence snowballed into a sweeping sell-off.

Tumbling Asian shares – which continued to fall early on Tuesday – led European stock markets into their biggest one-day fall since 9/11 as the prospect of a US recession and further fall-out from credit market turmoil prompted near panic among investors, who rushed to the safety of government bonds.

About $490bn was wiped off the market value of Europe’s FTSE Eurofirst 300 index and $148bn from the FTSE 100 index in London, which suffered its biggest points slide since it was formed in 1983. Germany’s Xetra Dax slumped 7.2 per cent to 6,790.19 and France’s CAC-40 fell 6.8 per cent to 4,744.45, its worst one-day percentage point fall since September 11 2001.

“September 11 aside, I can’t remember a day like this. It was carnage,” said Jimmy Yates, a dealer at CMC Markets in London.

Dow futures are now down over 500 points.

Tomorrow could be very, very bad on Wall Street.

The Dow is down 15% in the last four months.

This year could be very, very bad on Wall Street.

Fears of potential ratings cuts for bond insurers like Ambac and MBIA have added to the blood in the streets.

Financial talking heads are no longer talking about if the U.S. is going to fall into a recession; now they're talking about just how long and how bad the recession is going to be.

It looks like it's going to be very bad.

If panic continues to spread across the markets and the recession is as bad as some fear, mass public and private lay-offs won't be far off.

You can bet Mayor Moneybags will be looking to rid the Department of Education of some expensive substitute teachers in the ATR pool.

How much you want to make a bet Randi and the UFT throw the ATR's overboard if Bloomberg comes to them in the midst of a really bad recession and says "We have to cut payroll"?

UPDATE: The Dow futures were still down 500+ points this morning and Asian and European markets were still selling off. So Uncle Ben and the Fed panicked and cut interest rates by 3/4 by issuing an emergency rate cut just minutes ago.

When I woke this morning and saw the futures down as much as they were, I said to my girlfriend, "I bet Uncle Ben issues a surprise rate cut of 75 basis points at 8:30 before the U.S. markets open to stave off the panic."

I missed the surprise rate cut by 10 minutes. It was announced at 8:20 AM.

Another 50 basis points will probably be cut next week when the Fed meets officially.

That means the Fed will have cut the target interest rate from 4.25% to 3% in a week.

There goes the interest rate on my savings account. And that, of course is the point - they're trying to get you to borrow money, banks to lend money and people to BUY, BUY, BUY!!!

Ironically, the Dow futures rose from 525 to 190 within seconds of the announcement of the cuts, but now they're back down over 350.

What happens if the Fed gives a 75 basis point emergency rate cut and the markets still panic?

SECOND UPDATE: Dow futures down 555 as of 8:52 AM.

Should be an interesting day.

BTW, according to CNBC, the 75 basis points rate cut is the largest one-time cut since 1984.

Gee, no panic at the Fed.

THIRD UPDATE: As of 9:35 AM, the Dow is down 454, the Nasdaq 118. But 4:00 PM is a long way off and maybe they'll find a bottom and finish up from there.

As of 9:52 AM, the Dow is only off 240...