Wall Street endures further turbulence amid bleak news

Wall Street endured another turbulent session yesterday as the Dow Jones fell by 348.2 points, or 3.2 per cent, to close at 10,482.9. Credit markets also remained tight.

The nervousness was fuelled by worse-than-expected news on unemployment, factory orders and a report from the IMF that stated "the US economic downturn may well become more severe and could evolve into a recession." Investors were also cautious before the House of Representatives' vote on the revised Paulson plan.

The US government said the number of people seeking unemployment benefits rose last week to a seven-year high and that demand at the nation's factories has fallen by the largest amount in nearly two years. The jobless figures were exacerbated by the number of people in hurricane-hit Louisiana and Texas claiming for benefits. New unemployment benefit claims approached half a million in a week, raising fears that the recent unexpected resilience in the US economy, largely fuelled by tax rebates, may soon wear off.

The prospects remain grim. The IMF's early release today of parts of its twice-yearly key World Economic Outlook says: "The financial turmoil that began in the summer of 2007 has mutated into a full-blown crisis." There is "a substantial likelihood of a sharp downturn in the United States", the fund added. It pointed to the risk of global recession, defined as less than 3 per cent growth, and called on policymakers to take "strong actions" to deal with financial market stress.