U.S. equities plummet at the open

U.S. equities plummeted at the open, extending the global selling sparked overnight by news that electronics giant Sony Corp. cut its 2009 forecast while Toyota Motor Corp.'s third-quarter sales contracted for the first time in seven years, during the last U.S. recession. Both companies are based in Tokyo. Stock indexes around the world posted large losses, with Japan's Nikkei 225 index falling 9.6% and Hong Kong's Hang Seng index 8.3%. In Europe, the main stock indexes were down between 7.5% and 8.5%. In a rare event, U.S. equity futures had traded "limit down" before the open, preventing traders from offering the contract at lower levels than down 550 points for the Dow Jones Industrial Average and down 60 points for the Standard & Poor’s 500 stock index contracts. The two levels represented multiyear lows. It would take a 1,100-point drop in the Dow to trigger circuit breakers on the New York Stock Exchange, at which point trading is suspended for one hour. Analysts slashed their forecasts for a number of major companies around the world on prospects the global economy is on a path to less growth. The selling sparked a U.S. dollar rally, as the United States is seen further ahead down the road to tackling its housing- and financial-related woes. The negative corporate news added to the downward pressure that dominated recent sessions as hedge funds and mutual funds kept on selling positions tied to clients' redemption requests made in September. The U.S. dollar climbed to a two-year high against the euro, which slipped below $1.25, while it rebounded against the British pound to $1.53, a six-year low, after Britain reported a greater-than-expected economic contraction in the third quarter. But the Japanese yen rallied versus the U.S. dollar on a dramatic drop in demand for the carry trade, which allows investors to borrow in low-rate markets to invest in markets offering a higher return. The dollar fell to 91.81 against the U.S. dollar ahead of the open, a level not seen since August 1995. "I don't think that [former Federal Reserve Chairman Alan] Greenspan begins to grasp the enormity of the problem," said chief economist Robert Brusca at New York consultancy FAO Economics, referring to Mr. Greenspan’s testimony Thursday in Congress, in which he admitted that his assumption that the financial system can police itself was flawed. On the emerging-markets front, Belarus, Iceland, Hungary and the Ukraine tuned to the International Monetary Fund of Washington to ask for emergency loans to shore up their banking systems. Officials of the Organization of the Petroleum Exporting Countries of Vienna, Austria, holding an emergency meeting in that city to shore up prices, agreed to cut production by 1.5 million barrels of crude a day, but oil prices still declined in Europe on prospects of lower demand.