A record high oil price and a Federal Reserve refusal to lower interest rates combined for a brutal day on Wall Street on Thursday, which didn?t spare the stock prices of prominent local companies.
The Dow dropped 358.41 points to close at 11,453.42, its lowest finish since Sept. 11, 2006. Oil passed $140 per barrel after Libya said it would cut production, and Federal Reserve Chairman Ben Bernanke said interest rates would remain at 2 percent.
“I guess people are thinking that Bernanke at the Fed is chickening out and he?s not going to raise interest rates to protect the dollar,” said Joel Morse, a University of Baltimore economist and stock market expert.
“He?s talking tough but not acting tough,” Morse said. “It?s understandable if he increases the interest rate it will exacerbate the recession, but it?s what?s necessary to shore up the economy.”
Citigroup Inc. stock fell sharply after an analyst gave it a “sell” rating and warned investors to expect less from the brokerage sector.
Locally, Legg Mason opened at $47.74 but closed at $45.60, losing more than 4.48 percent in the day?s trading. Earlier this month, the company?s stock reached as high as $54. The company?s stock has fallen nearly 40 percent since the beginning of the year.
“With Legg Mason, their business model is sort of outdated,” Morse said. “It depends on high brokerage commission, which is not going on in an age of Internet trading.”
The tough day also reached the retail sector, with performance apparel maker Under Armour?s stock falling 3.21 percent Thursday from an opening of $27.70 to $26.81. The company?s stock reached $36 on June 2, and has fallen more than 40 percent since the beginning of the year.
“Under Armour clothing is very expensive; it does well when the economy is doing well,” Morse said. “But when people are cutting back for various reasons, they can?t really afford to have all those discretionary purchases.”
Legg Mason fell again Friday, closing down 3.27 percent to $44.11, and Under Armour also fell 2.72 percent to close at $26.08.
