Stocks plunge as fearful investors rush for the exits

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Stock markets around the world are tumbling on fears that the global economy is falling precipitously and that U.S. and European lawmakers are unable to stop the bleeding.

The market is at risk of the biggest weekly drop since the depths of the global financial crisis in 2008.

As of 10:40 a.m. PST, the Dow Jones industrial average was down 425.22 points, or 3.8%, to 10,699.62. That followed a 2.5% drop on Wednesday. The Standard & Poor’s 500 index is off 39.09 points, or 3.4%, to 1,127.67.

The U.S. declines followed sharp drops overnight in European and Asian markets, most of which fell about 5%.

The worldwide sell-off followed the Federal Reserve’s announcement Wednesday that it is rejiggering its holdings of Treasury bonds in its latest bid to spur the economy by lowering interest rates on everything from home mortgages to car loans.

Many analysts doubt the Fed action will have any measurable effect, and investors were spooked by the Fed’s bluntly worded assessment warning of ‘significant downside risks to the economic outlook.’

The sell-off “is a direct reaction to the Fed’s statement and actions,” said John Bollinger, head of Bollinger Capital Management in Manhattan Beach. “It’s the markets’ vote that the actions aren’t commensurate with the risks described in the statement.”

The market is falling even though an index of leading economic indicators -- a gauge intended to foreshadow economic developments in coming months -- rose more than expected last month.

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-- Walter Hamilton