Video: Wall St. suffers worst selloff since 2008

  1. Transcript of: Wall St. suffers worst selloff since 2008

    MATT LAUER, co-host: But let us begin on this Friday morning with Wall Street 's worst sell-off since the financial meltdown back in 2008 . We are joined, as I mentioned, by CNBC 's Maria Bartiromo and Jim Cramer . Guys , good morning to both of you.

    MARIA BARTIROMO reporting: Good morning, Matt.

    LAUER: Is this a classic correction?

    BARTIROMO: It feels that way. I mean, I think it's based on real fundamentals and that is that an economy is softening. And that's really the worry here.

    LAUER: The definition, Jim , of a nanosecond is the time between a market plunging and the blame game starting. So where does the blame belong in this situation?

    JIM CRAMER reporting: Right. This one is squarely not our fault. I think this is very much based on Europe and the profligacy of actual governments in Europe , not banks in the United States . And arguably that's why it's so difficult for people to understand.

    LAUER: We're hearing a lot of the term "correction." We're also hearing another term, "double-dip recession." You talked about this on our show just the other day.

    CRAMER: Yes.

    LAUER: The White House says they don't think that's what we're seeing right now. And let me read you what Paul Krugman writes in this morning New York Times . "It's not just that the threat of a double-dip recession has become very real. It's now impossible to deny the obvious, which is that we are not now and have never been on the road to recovery." I'd like your reaction to that.

    CRAMER: Well, first I would say, I read that piece and I've got to tell you that's about as gloomy as you get. That usually signifies...

    LAUER: Too gloomy?

    CRAMER: I thought too gloomy, as well as when we have a lot of people down here. It's usually closer to a bottom than a top. I will say, look, things are not good. It's just that I do believe that the possibility of a recession has increased. I do think it could even happen. But the idea that everything is falling apart a la 2008 is just wrong. Got to be take that off the table.

    LAUER: And one of the main differences between now and 2008 , back in 2008 the banks were misbehaving, companies were doing badly. Here in 2011 the banks are doing pretty well, companies are doing pretty well, although they're not hiring. Banks are sitting on a mountain of money.

    BARTIROMO: Yes, they are. Two and a half trillion dollars of cash on balance sheets of corporations. And the banks in particular has been able to raise an enormous amount of capital. But the -- but the issue, I think, is that it doesn't really matter what you call it, recession, depression, double-dip...

    CRAMER: Right.

    BARTIROMO: ...triple-dip, it doesn't matter, the bottom line is we all feel it and we're nervous and there's nervousness and fear out there. And so it doesn't really matter what you label it. At the end of the day we're still in a very fragile situation. Unemployment the big issue.

    LAUER: And when you say -- when you say there's nervousness, consumers are scared.

    CRAMER: Right.

    LAUER: And when you remember that the consumers drive 70 percent of the US economy , that's a very bad thing.

    BARTIROMO: It is. And that's why retail is one of the areas that people are selling right now. I think you have to watch for more data points to find out really where we are in this recovery. But there's no doubt about it , the unemployment situation, the retail situation is very fragile, very weak right now.

    CRAMER: Right. But the retail market is very much hinging on two things: consumer confidence but also gasoline prices. Look, I'm no Pollyanna , and you know that...

    LAUER: Right.

    CRAMER: ...but I do see oil plummeting. That is going to be a relief of a tax on every American consumer.

    LAUER: All right, you are no Pollyanna . I want to remind you what you said on our show back in 2008 as the markets were plunging back then. You said if you need your money, and you said this to the consumer and the investor out there, if you need your money near term get out of the markets.

    CRAMER: Right.

    LAUER: You don't feel we're there again?

    CRAMER: Fire was raging in a theater. Sometimes you want to save as many people as you can. This time the fire's not raging. I think things are better than people realize, I do believe the market can go down more. But this is a different time. We have the first national bank of corporations. Our corporations are just in the best shape they've been. Our banks are better than any other banks in the country -- world, other than China .

    LAUER: Yeah, but there's another...

    BARTIROMO: Is is true. But longer term that's definitely the case that's very much in place.

    CRAMER: Right.

    BARTIROMO: That doesn't mean short term we won't see more volatility and further losses for the stock market .

    LAUER: But there's another big difference. Back in 2008 the government jumped in with a huge stimulus plan. We know that's not going to happen right now. There's no money for that.

    BARTIROMO: There's no money for that, but the Federal Reserve will be there, whether it is low interest rates, guidance in terms of their language. So the Fed will be there. At this point, the stock market is very important because that's making people feel poorer or richer. So it does feed on itself in some ways.

    CRAMER: But, look, I would have no qualms about telling people to get out again if I felt it was going to plummet. We dropped 33 percent after I made that call. I don't see that happening. I think we can certainly go down, but I don't see that kind of systemic risk in this country like I do in Europe.

    LAUER: Just really quickly, we're about an hour away from some jobs numbers coming out for the month of July. How are they going to impact the market? What are you expecting?

    BARTIROMO: People are expecting about 85,000 new jobs created for the month of July. Anything that's much weaker than that I think will be problematic for this market.

    CRAMER: Right, right.

    BARTIROMO: The good news is that we already have low standards here. The bar has been lowered. So we're expecting a tough month.

    CRAMER: Stronger than 2008 in this country. Weaker over there. Please keep in mind, stronger, which means doom and gloom not correct right now.

    LAUER: Jim Cramer , Maria Bartiromo . Folks , nice to have you here. Thanks very much. And it is now time to go back to Studio 1A and Ann. news services
updated 8/5/2011 7:53:35 AM ET 2011-08-05T11:53:35

Global stock markets tumbled Friday amid fears the U.S. may be heading back into recession and Europe's debt crisis is worsening.

The sell-off follows the biggest one-day points decline on Wall Street since the 2008 financial crisis.

Oil extended sharp losses to fall below $84 a barrel amid expectations a slowing global economy will undermine demand for crude.

In Europe, major markets fell, adding to losses Thursday.

By about 7:12 a.m. ET, London's FTSE 100 had declined 2.28 percent to 5,269.93, according to a report on BBC News. Germany's DAX had shed 2.18 percent to 6,275.10 while France's CAC-40 had lost 0.64 percent to 3,299.12.

Story: Topsy-turvy day on Wall Street; Dow up 60

Japan's Nikkei 225 stock average closed down 3.72 percent at 9,299.88 and Hong Kong's Hang Seng dived 4.29 percent to 20,946.14. China's Shanghai Composite Index lost 2.13 percent to 2,627.08.

"Losses today have been indiscriminate," said IG Markets strategist Ben Potter in a report. "The big question on everyone's mind is what will happen across European and U.S. markets tonight and will there be any form of emergency policy response?"

The Dow closed Thursday down 512.76 points , at 11,383.68. It was the steepest point decline since Dec. 1, 2008.

Thursday's decline was the ninth-worst by points for the Dow. In percentage terms, the decline of 4.3 percent does not rank among the worst. On Black Monday in 1987, for example, the Dow fell 22 percent.

Video: Time-lapse of the Dow's horrible day (on this page)

'Extremely fragile'
Investors fretted over the U.S. economic recovery ahead of Friday's release of crucial jobs figures for July, which often set the tone in markets for a week or two.

Many were also rattled by the lack of agreement in Europe about debt and how to stabilize the euro, said Tom Kaan of Louis Capital Markets in Hong Kong. He said they were watching to see if the U.S. Federal Reserve launches a new stimulus effort.

"It's a general fear that is clouding the markets at the moment," Kaan said.

Story: Time to say it: We're probably in a double dip recession

"The economic outlook is stressing investors to a great degree and sentiment is likely to remain extremely fragile," Keith Bowman, equity analyst at Hargreaves Lansdown, told Reuters.

"The U.S. economy has been slowing and is moving into a phase where we are going to see spending cuts enforced," he added. "Investors are concerned as to where future growth will come from with this backdrop of debt for so many governments."

Major Market Indices

Automobile shares bore the brunt of the sell-off in Europe on concerns about weaker sales for vehicles, Reuters reported. The sector index fell 4.6 percent.

"Equity valuations are already pretty low but sentiment keeps deteriorating, so why come in and buy now?" said Shane Oliver, head of investment strategy at Sydney-based AMP Capital, which has more than $100 billion in assets under management.

Story: Investors flee stocks for safer ground

David Gaud, Asia ex-Japan fund manager at Edmond de Rothschild Asset Management in Hong Kong, said there was "a rational reason for the markets to fall" and predicted bleaker times ahead.

"We need to face reality here," he said. "The second half is going to be much tougher than we thought."

Ominous sign
In an ominous sign, gold prices in the past 24 hours were soft despite the spiralling fears hurting risky markets. Investors were having to sell gold positions to cover losses elsewhere in their portfolios.

"This will not be a quiet day. Liquidity will be at a premium," a sales trader with a European bank said.

Elsewhere in Asia, South Korea's Kospi sank 3.7 percent to 1,943.75 and Taiwan's benchmark skidded 5.6 percent to 7,853.13. Australia's benchmark dropped 4 percent to 4,105.40 and India's Sensex shed 2.8 percent to 17,196.06.

In China, state-owned oil producer CNOOC Ltd. plunged 7.7 percent. China Construction Bank Ltd., one of the country's four major state-owned banks, lost 2 percent and Ping An Insurance Ltd. declined 3.9 percent.

Story: Jobless claims slip slightly but remain elevated

Investors, already fidgety after protracted political bargaining to raise the U.S. debt limit and worries that Italy and Spain are getting deeply embroiled in Europe's debt crisis, searched for assets considered safer such as gold.

"Stocks will continue to dive, especially in Euroland, where profits are disappointing analysts' estimates," said Carl B. Weinberg of High Frequency Economics in a report.

In currency markets, the dollar edged down to 78.48 yen from late Thursday's 79.02 and the euro weakened gained to $1.4153 from $1.4130.

On Thursday, Japan's government intervened in markets to weaken the yen against the dollar to support exporters.

Story: Why companies aren’t hiring more workers

Finance Minister Yoshihiko Noda said authorities acted to protect the economic recovery following the March 11 earthquake and tsunami.

The dollar had fallen as low as 76.29 yen on Monday. It hit a record post-World War II low of 76.25 yen in the days following the March 11 earthquake and tsunami.

The intervention was coupled with monetary policy easing by the central bank's board.

Japan's moves came only a day after the Swiss National Bank intervened to slow a rise in the Swiss franc, another currency perceived as a save-haven at a time investors are fleeing risky assets such as shaky European government bonds.

Benchmark oil for September delivery was down $2.81 to $83.82 a barrel in electronic trading on the New York Mercantile Exchange. Crude tumbled $5.30 to settle at $86.63 on Thursday.

In London, Brent crude was off $1.26 at $105.99 barrel on the ICE Futures exchange.

Reuters and The Associated Press contributed to this report.

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