Three straight days packed with financial news and worry -- including the repercussions of meltdowns at major financial institutions -- have panicked investors and sent them looking for safer ground.
Morgan Stanley and Goldman Sachs, the two remaining titanic investment banks, no longer look as secure as they once did, largely because of the Wall Street panic rather than because of their own performance, the New York Times reports. Morgan Stanley is now said to be seeking preemptive action to avoid a familiar gruesome end:
Only a day earlier, Morgan Stanley defended itself from growing doubts about its future, issuing a fairly positive earnings report to ward off concerns about its health. But the fear that gripped markets after Lehman Brothers failed also enveloped the firm.
Seeking to avoid the kind of fate that led Lehman and Bear Stearns to collapse, John J. Mack, Morgan Stanley's chief executive, made an unsuccessful effort on Tuesday evening to persuade Citigroup's chief executive, Vikram S. Pandit, to enter into a combination, according to people briefed on the talks.
As many stocks are sold off, sending the Dow plunging, Forbes reported that the fear on Wall Street was so great that investors bought up government bonds, traditionally very safe, at breakneck speed:
Traders were so desperate to move money into safer investments that at one point the frenzied buying of U.S. government debt sent the yield on the one-month Treasury bill below zero. By the time the closing bell rang on Wall Street the bill's yield was back up to 0.75%. Yields on longer maturities fell sharply with investors bidding prices higher. The 10-year note was offering 3.38%, down from 3.49% Tuesday, while the two-year note yield fell to 1.63%, from 1.91%.
Gold, too. It jumped more than 10 percent:
"I don't know that we've ever seen a move to the upside on this magnitude in gold history," Jonathan Kleisner, of Rex Capital Group, said on CNBC. "You could certainly draw a straight line from this market markets issue to the monetized, tangible safety of that gold metal."
Kleisner said gold has always been the "safe haven of last resort" for investors stung by stocks.