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Google (nasdaq: GOOG - news - people )’s shares soared 8.8%, or $30.98, to $384.00 in after-hours trading. It had risen 4.1% in regular trading, though it remains well below the $740-plus at which it traded hands last year.

“We had a good third quarter with strong traffic and revenue growth across all of our major geographies thanks to the underlying strength of our core search and ads business,” said Chief Executive Eric Schmidt.

Nonetheless Schmidt said he is realistic about the turmoil in the global economy, and the company will continue to invest for the long term.

The Mountain View, Calif.-based search engine reported earnings jumped 26.0%, to $1.4 billion, or $4.24 per share, up from $1.1 billion, or $3.38 per share, in the prior year.

Excluding costs for employee stock compensation, Google said it would have earned $4.92 per share, beating analysts’ forecasts of $4.75 per share.

Revenue soared 31.0%, to $5.5 billion. After subtracting advertising commissions, however, Google's revenue totaled $4.0 billion, slightly below analysts’ estimates.

Google generates nearly all its money from consumers clicking on the ads on its sites and partner sites. (See “ Economy Weighs On eBay, Google.”)

But the weak economy has dampened spending, and the holiday shopping season is shaping up to be a poor one.

Global Equities Research analyst Trip Chowdhry said he is concerned that Google missed Wall Street’s revenue estimates since it has historically beat forecasts “hand over fist.” “For the first time in history Google missed on the top line,” Chowdhry said. “Google’s growth rates are declining.”

Chowdhry said that Google’s website growth rate, which makes up 67.0% of its revenue, was 49.0% in the first quarter, before tumbling to 34.0% in the third quarter, a trend he said is “bothersome.”

“The company’s probably reaching a maturity stage,” he said. “It’s not a secular growth story anymore.”

Google is famous for not providing financial guidance, a policy Chowdhry said it might be forced to reconsider as investors demand increased information from companies.

Banking regulators are working today to resolve accounting roadblocks that would hold up the government's plan to revive financial markets by investing $250 billion in the nation's banks.

Protesters in Philadelphia call for more action on the subprime crisis Adam Nadel/Polaris

The financial system, perhaps, has been saved. Now, what about homeowners?

So far, attempts to slow the foreclosure epidemic at the center of the crisis have had little impact. Despite "voluntary" industrywide efforts to rework troubled mortgages—efforts that Treasury Secretary Henry Paulson jawboned banks and mortgage servicers into undertaking last fall—the numbers continue to soar. In 2008 some 1.69 million homeowners will lose their houses—double the rate of two years ago, says Rod Dubitsky, managing director for asset-backed securities at Credit Suisse (CS). He thinks 3.6 million more foreclosures could pile up through 2012.

Both Presidential candidates now want the federal government to take a more active role in buying up troubled mortgages and helping homeowners refinance with more affordable loans. Congress has also insisted the Treasury do more. But many of the proposals, which are based on the Depression-era Home Owners' Loan Corp., are likely to run into the same legal woes that have stymied mortgage workouts so far. The government may have to find a more extreme legal solution to get mass workouts going.

The reason: No one has figured out how to untie the Gordian knot created by the mass securitization of mortgage loans. Hundreds of investors may own an interest in the trust that holds any given mortgage. If a loan is reworked, some of those investors would lose more than others. In many cases, mortgage servicers are prohibited from modifying a pool of loans without the consent of two-thirds of the investors; often, the servicers also earn more in foreclosure than in reworking a loan. "The servicer or the lender needs more flexibility to reach a rational economic decision," says John L. Douglas, chair of the banking and financial institutions group at law firm Paul, Hastings, Janofsky & Walker.

What might that mean? Douglas thinks servicers need protection from investor lawsuits. But others say the government may have to nullify or supersede some of their obligations or investors' rights. To give securities holders more incentive to loosen the trust rules that govern them, Georgetown University Law Center associate professor Adam Levitin argues that Congress could reduce the favorable tax status for trusts that don't go along. Or, he says, what's known as the Gold Clause could be invoked. Under this New Deal-era legal precedent, the government, citing the need to preserve gold because of the economic emergency, abrogated private contracts that required payment in bullion. Washington could use the Gold Clause to give trusts leeway to modify mortgages.

Those tactics could spark enormous litigation, however. Uncle Sam might also have to reimburse investors for lost value. That's why many argue it would be better for Congress to change the bankruptcy laws. Currently, homeowners who go belly-up cannot renegotiate their mortgages in court. Democrats have tried to alter the law so bankruptcy judges can trim interest or principal. "It gets around the biggest impediment to workouts without costing taxpayers a penny," says Jaret Seiberg, an analyst for the Stanford Group brokerage.

Republicans have blocked the effort, arguing that if courts were granted these new powers, lenders would see their losses soar and pass the cost on through pricier mortgages. But should foreclosures continue to skyrocket—and should Barack Obama, who backs the bankruptcy measure, be elected President—mortgage holders could find themselves on the losing end of the battle.

From a product point of view, Apple CEO Steve Jobs usually goes bold. But when it comes to running the company's numbers, he rarely goes out on a limb. That was made plain Oct. 14, when Jobs announced a new laptop lineup. Despite rumors he'd introduce a laptop for $800 or less that might have helped Apple (AAPL) gain market share at the expense of margins, the company held prices close to where they've always been.

The company trimmed the price of the basic MacBook by $100, to $999. It also introduced a new midlevel MacBook with many of the features of the MacBook Pro starting at $1,300—the same as the old mid-range MacBook—and a version of the swankier MacBook Pro for $2,000, the same as its predecessor.

No doubt, there's more Mac for the money. All of the new devices feature an instant-on, backlit LED screen and faster graphics, courtesy of a chip from NVIDIA (NVDA), while the $1,300 and $2,000 models are packaged in a beautiful new aluminum shell that's thinner than ever.

Why Trim Margins?

But many Wall Street analysts thought Apple would use the product introductions to steal a large chunk of market share. After all, the company has grown two to three times faster than the PC market over the past four years, thanks in part to a successful "I'm a Mac" ad campaign and disappointing demand for Microsoft's (MSFT) competing Vista operating system. Apple even said it would sacrifice some margin (BusinessWeek.com, 7/21/08) during the quarter that includes the yearend holidays. While Apple has enjoyed this success by focusing on customers willing to spend for a higher-end machine, BMO Capital Markets analyst Keith Bachman figured that an $800 MacBook would help Apple compete for 62% of the laptop market, vs. 51% of the market with a low price of $999.

But giving in to the margin-grab temptation would have been risky to Apple's long-term health, says Stephen Baker, an analyst at NPD Group. A slew of PC companies over the years (Packard Bell and eMachines, anyone?) became money-losing businesses by slashing prices too far. Gross margins narrowed not only as a result of lower prices but because price-conscious shoppers with less tech acumen make more support calls. As a result, any profits on the initial sale frequently disappeared amid rising customer service costs.

Apple can keep on rankling rivals without overdoing it on price cuts. The company's share of the U.S. retail PC business is now 18% by units and 31% by sales, Apple Chief Operating Officer Tim Cook said at the Oct. 14 product introduction. He noted that Apple has sold as many Macs in the past three quarters as it did all of last year.

Apple also has little reason to move on prices, given a relative lack of new technologies or features from PC makers this Christmas. Baker figures most people who want to try out a Mac already have decided to do so. As a result, a big price cut would needlessly eat into Apple's revenue. "People come into Apple stores expecting to pay a certain amount," he says. "There's no evidence that customers are particularly asking for a $799 Mac. But if you offered it to them, many of them would make that choice…One of the reasons Apple does so well at selling $1,000 computers is that they don't give you the choice of a $799 model."

Consumers Still Pony Up for Electronics

Of course, the reluctance to cut prices too far could alienate customers looking for a bargain amid economic turmoil. Fears of Apple's exposure to a big downdraft in consumer spending sent Apple shares down 5.6%, to 104, on Oct. 14. "People say Apple is fortunate to sell to more sophisticated customers, not Joe Six-Pack," says Roger Kay, founder of Endpoint Technologies Associates. "But a lot of those sophisticated customers were supporting their spending with credit last year. Some of those folks that want to put the fancy Apple decal on their fancy car won't have the cash for a new Mac this year. They may settle for something cheaper."

But so far, there's little evidence to suggest that U.S. consumers are getting thrifty when it comes to consumer electronics, says Baker of NPD. Three of the best-selling categories—digital SLR cameras, LCD televisions, and laptops—are "also among the most expensive products you can buy," he notes. "And sales of all three have continued to grow throughout 2008." Jobs hopes the trend continues well into the new year.

Google just reported third-quarter results, and it managed to defy skeptics who thought it might finally fall victim to the poor economy. Net revenues of $4.04 billion were dead-on with analysts’ estimates, and profits before special items was $4.92 a share, handily beating expectations. The big reason: It reined in expenses, hiring fewer people and actually cutting capital expenses from a year ago.

Analysts had forecast $4.80 in earnings per share, minus special items such as stock option expenses, on net revenues of $4.05 billion after payments to partners that run Google ads on their sites. However, many analysts were informally assuming Google might come in slightly below their stated estimates and have been reducing estimates and price targets in recent weeks. A year ago, Google earned $3.92 a share.

In after-hours trading, Google’s stock, which closed up 4% today in a late rally along with the broader market, to $356.50 a share, was rising 10%, though that will likely vacillate after the earnings call. The stock had fallen 11% in the last three sessions for before today.

More from the release after the jump. And here’s CEO Eric Schmidt, which at the outset doesn’t indicate much about the future to my reading, except that he’s acknowledging the poor economy. However, he has done that before as well.

“We had a good third quarter with strong traffic and revenue growth across all of our major geographies thanks to the underlying strength of our core search and ads business. The measurability and ROI of search-based advertising remain key assets for Google. While we are realistic about the poor state of the global economy, we will continue to manage Google for the long term, driving improvements to search and ads, while also investing in future growth areas such as enterprise, mobile, and display.”

Google third-quarter results are less important as a sign of the times than what’s coming next. And partly because Google doesn’t provide earnings guidance, analysts are somewhat pessimistic. “There’s a lot of doubt about whether the 2009 estimates are too high,” says John Aiken, managing director of Majestic Research. Currently, the consensus is for 23% growth, but Aiken thinks 20% is more likely, and even 15% is possible.

Although Google has been largely shielded from the downturn so far, the now nearly certain prospect of a protracted recession seems likely to affect even search advertising, especially since it is driven significantly by small and medium-sized businesses. Perhaps to an even greater extent than their larger brethren, they face dropping consumer demand and a scarcity of capital thanks to the credit crunch.

And even if they keep spending on search ads, it’s possible consumers who click on them will end up deciding to buy less often, which would make them less effective for advertisers. A third-quarter study from SearchIgnite this week, for instance, did find one trouble spot: Retailers in particular are starting to reduce their search ad spending, down 10% in September.

So Google’s third-quarter results aren’t nearly as important as the prospects for the fourth quarter and 2009. We’ll hear more about this from the earnings call, which starts shortly. I’ll add what I hear after the jump.

Tidbits from the conference call:

Schmidt says traffic and revenue were "solid" and search query traffic rose in all vertical markets.

"The economic situation today is globally worse than what people were predicting just a month ago. ... But we're optimistic about Google's future."

New CFO Patrick Pichette noted that most geographies were strong, but mentioned the U.K. showed some weakness, up only 17% including currency adjustments. "Our core business continues to demonstrate strength despite a challenging economic environment."

Now cofounder and President of Technology Sergey Brin is talking about improvements in search, YouTube's various experiments in ads, and Android phones. Not much news you haven't heard yet.

He says more than 1 million businesses are using Google Apps.

Now on to analysts' questions. First, on the economy: Schmidt: "We see fluctuations, which are more complex than they may seem. Some things go up, some things do down." OK, Eric. He calls on Google economist Hal Varian: "It's very hard to tell what things are going to look like on a going-forward basis." OK, Hal. Now Jonathan Rosenberg mentions results may vary according to specifics on Google's quality adjustments on search ads. So, no real answer here.

Will economy prompt Google to cut costs, or delay investing in opportunities such as mobile. Schmidt: Google has shown courage when we need to ... as well as expense containment." Pichette talks about how Google will show discipline, but no specifics.

Question about whether Google is surprised at the reaction of advertisers to the Google deal. Sounds like they were, because Schmidt says, "Many of the complaints are based on the fact that many people don't understand how auctions work, or the benefits."

Question about whether advertisers are changing behavior because of the economy. Not really, says Varian: "Advertisers are willing to take all the clicks we can give them at the current CPCs (cost per click)," and he thinks that will continue regardless of the economy.

Question about impact of economy on retail given eBay's bearish outlook: Varian, as he did last quarter, still think Google could actually benefit as people are careful about shopping and search even more for better deals.

Question about improvement in margins--from cost cutting or change in advertising arrangements? Pichette: "Across all categories of expenses, people have been very diligent" in watching expenses. Hiring was less than in previous quarters. Capital expenditures were lowest since Q1 2006, another analyst notes.

Stock's still up about 9% in extended trading, so nothing on the call changed people's minds that this was an upside surprise.

Here's the earnings release:

Google reported revenues of $5.54 billion for the quarter ended September 30, 2008, an increase of 31% compared to the third quarter of 2007 and an increase of 3% compared to the second quarter of 2008.
Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the third quarter of 2008, TAC totaled $1.50 billion, or 28% of advertising revenues.

Google reports operating income, net income, and earnings per share
(EPS) on a GAAP and non-GAAP basis. The non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, are described below and are reconciled to the corresponding GAAP measures in the accompanying financial tables.

l GAAP operating income for the third quarter of 2008 was $1.74
billion, or 31% of revenues. This compares to GAAP operating income of $1.58 billion, or 29% of revenues, in the second quarter of 2008.
Non-GAAP operating income in the third quarter of 2008 was $2.02 billion, or 37% of revenues. This compares to non-GAAP operating income of $1.85 billion, or 34% of revenues, in the second quarter of 2008.

l GAAP net income for the third quarter of 2008 was $1.35 billion as
compared to $1.25 billion in the second quarter of 2008. Non-GAAP net income in the third quarter of 2008 was $1.56 billion, compared to
$1.47 billion in the second quarter of 2008.

l GAAP EPS for the third quarter of 2008 was $4.24 on 318 million
diluted shares outstanding, compared to $3.92 for the second quarter of 2008 on 318 million diluted shares outstanding. Non-GAAP EPS in the third quarter of 2008 was $4.92, compared to $4.63 in the second quarter of 2008.

l Non-GAAP operating income, non-GAAP operating margin, non-GAAP net
income, and non-GAAP EPS are computed net of stock-based compensation (SBC). In the third quarter of 2008, the charge related to SBC was $280 million as compared to $273 million in the second quarter of 2008. Tax benefits related to SBC have also been excluded from non- GAAP net income and non-GAAP EPS. The tax benefit related to SBC was
$63 million in the third quarter of 2008 and $48 million in the second quarter of 2008. Reconciliations of non-GAAP measures to GAAP operating income, operating margin, net income, and EPS are included at the end of this release.

Q3 Financial Highlights

Revenues – Google reported revenues of $5.54 billion for the quarter ended September 30, 2008, representing a 31% increase over third quarter 2007 revenues of $4.23 billion and a 3% increase over second quarter 2008 revenues of $5.37 billion. Google reports its revenues, consistent with GAAP, on a gross basis without deducting TAC.

Google Sites Revenues - Google-owned sites generated revenues of $3.67 billion, or 67% of total revenues, in the third quarter of 2008. This represents a 34% increase over third quarter 2007 revenues of $2.73 billion and a 4% increase over second quarter 2008 revenues of $3.53 billion.

Google Network Revenues - Google’s partner sites generated revenues, through AdSense programs, of $1.68 billion, or 30% of total revenues, in the third quarter of 2008. This represents a 15% increase over network revenues of $1.45 billion generated in the third quarter of
2007 and a 1% increase over second quarter 2008 revenues of $1.66 billion.

International Revenues - Revenues from outside of the United States totaled $2.85 billion, representing 51% of total revenues in the third quarter of 2008, compared to 48% in the third quarter of 2007 and 52% in the second quarter of 2008. Had foreign exchange rates remained constant from the second quarter of 2008 through the third quarter of 2008, our revenues in the third quarter of 2008 would have been $59 million higher. Had foreign exchange rates remained constant from the third quarter of 2007 through the third quarter of 2008, our revenues in the third quarter of 2008 would have been $168 million lower.

In the third quarter, we recognized a benefit of $34 million to revenue through our foreign exchange risk management program.

Revenues from the United Kingdom totaled $776 million, representing 14% of revenue in the third quarter of 2008, compared to 16% in the third quarter of 2007 and 14% in the second quarter of 2008.

Paid Clicks – Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our AdSense partners, increased approximately 18% over the third quarter of 2007 and increased approximately 4% over the second quarter of 2008.

TAC - Traffic Acquisition Costs, the portion of revenues shared with Google’s partners, increased to $1.50 billion in the third quarter of 2008. This compares to TAC of $1.47 billion in the second quarter of 2008. TAC as a percentage of advertising revenues was 28% in the third quarter, compared to 28% in the second quarter of 2008.

The majority of TAC expense is related to amounts ultimately paid to our AdSense partners, which totaled $1.33 billion in the third quarter of 2008. TAC is also related to amounts ultimately paid to certain distribution partners and others who direct traffic to our website, which totaled $167 million in the third quarter of 2008.

Other Cost of Revenues - Other cost of revenues, which is comprised primarily of data center operational expenses, amortization of intangible assets, content acquisition costs as well as credit card processing charges, increased to $678 million, or 12% of revenues, in the third quarter of 2008, compared to $674 million, or 13% of revenues, in the second quarter of 2008.

Operating Expenses - Operating expenses, other than cost of revenues, were $1.63 billion in the third quarter of 2008, or 29% of revenues, compared to $1.64 billion in the second quarter of 2008, or 31% of revenues. The operating expenses in the third quarter of 2008 included $859 million in payroll-related and facilities expenses, compared to $810 million in the second quarter of 2008.

Stock-Based Compensation (SBC) – In the third quarter of 2008, the total charge related to SBC was $280 million as compared to $273 million in the second quarter of 2008.

We currently estimate stock-based compensation charges for grants to employees prior to October 1, 2008 to be approximately $1.1 billion for 2008. This does not include expenses to be recognized related to employee stock awards that are granted after October 1, 2008 or non- employee stock awards that have been or may be granted.

Operating Income - GAAP operating income in the third quarter of 2008 was $1.74 billion, or 31% of revenues. This compares to GAAP operating income of $1.58 billion, or 29% of revenues, in the second quarter of 2008. Non-GAAP operating income in the third quarter of
2008 was $2.02 billion, or 37% of revenues. This compares to non-GAAP operating income of $1.85 billion, or 34% of revenues, in the second quarter of 2008.

Interest Income and Other, Net – Interest income and other was $21 million in the third quarter of 2008, compared with $58 million in the second quarter of 2008. The decrease was primarily related to an increase in expenses substantially due to more activity under our foreign exchange risk management program. The cost of the options used to manage our foreign exchange risk is amortized on a mark-to-market basis. As a result, the amount of amortization expense we recognize in any particular quarter is impacted by how much the option moves into or out of the money, as well as the underlying currency's volatility.

Net Income – GAAP net income for the third quarter of 2008 was $1.35 billion as compared to $1.25 billion in the second quarter of 2008.
Non-GAAP net income was $1.56 billion in the third quarter of 2008, compared to $1.47 billion in the second quarter of 2008. GAAP EPS for the third quarter of 2008 was $4.24 on 318 million diluted shares outstanding, compared to $3.92 for the second quarter of 2008, on 318 million diluted shares outstanding. Non-GAAP EPS for the third quarter of 2008 was $4.92, compared to $4.63 in the second quarter of 2008.

Income Taxes – Our effective tax rate was 24% for the third quarter of 2008.

Cash Flow and Capital Expenditures – Net cash provided by operating activities for the third quarter of 2008 totaled $2.18 billion as compared to $1.77 billion for the second quarter of 2008. In the third quarter of 2008, capital expenditures were $452 million, the majority of which was related to IT infrastructure investments, including data centers, servers, and networking equipment. Free cash flow, an alternative non-GAAP measure of liquidity, is defined as net cash provided by operating activities less capital expenditures. In the third quarter of 2008, free cash flow was $1.73 billion.

We expect to continue to make significant capital expenditures.

A reconciliation of free cash flow to net cash provided by operating activities, the GAAP measure of liquidity, is included at the end of this release.

Cash – As of September 30, 2008, cash, cash equivalents, and marketable securities were $14.4 billion.

On a worldwide basis, Google employed 20,123 full-time employees as of September 30, 2008, up from 19,604 full-time employees as of June 30, 2008.

FINANCIAL MARKET SUMMARY
Symbol Lookup: Companies & Funds

	DJIA 8,979.26  +401.35    NASDAQ 1,717.71  +89.38    SPX 946.43  +38.59    S  3.33 0.00    LMT  92.61 +5.14    FNM  0.99 -0.01    DJIA 8,979.26  +401.35    NASDAQ 1,717.71  +89.38    SPX 946.43  +38.59    S  3.33 0.00    LMT  92.61 +5.14    FNM  0.99 -0.01

Personalize Ticker | Updated 4:00 PM, 10/16/2008	Disclaimer | © MarketWatch Inc. Source: Interactive Data Corp

The Dow Jones industrial average was down as much as 376 points at one point, but closed up 4.7 percent, or 401 points, at 8,979. The Standard & Poor's 500-stock index gained 4.3 percent, or 39 points, to end the day at 946.

The tech-heavy Nasdaq rose 5.5 percent, or 89 points, to 1,718. It was helped by a 10.5 percent surge in Yahoo's share price. The Internet firm received a boost from reports that Microsoft's chief executive, Steve Ballmer, said a deal between the companies might still make economic sense. Yahoo rejected a previous offer from Microsoft, which closed up 6.8 percent. Both firms were among the most actively traded companies in the Nasdaq today.

There is a battle between investors who are confident stocks have reached their bottom and others who see more downside to come amid gloomy economic data and corporate earnings. "This is a sucker's rally," said Joseph Brusuelas, chief U.S. economist at California-based Merk Investments. "There's a very difficult period ahead."

Today's gains follow the markets' huge dive yesterday, when the Dow fell more than 700 points.

Analysts said investors no longer question whether there will be a recession, but instead are worried about how long it will last and how deep it will be.

The government's responses to the financial crisis, from lowering interest rates to taking stakes in major banks, are good steps toward stability, economists and analysts have said. But they do not address the more immediate economic problems and have yet to drastically impact the credit squeeze as lenders remain reluctant to lend to each other.

Market volatility has become the new norm, said Doug Roberts, chief investment strategist for New Jersey-based Channel Capital Research. "Right now people are worried things are going to fall off a cliff. Every bit of news moves the market," he said.

Economic data released by the Labor Department today was mixed. New claims for jobless benefits dropped by 16,000 last week to a seasonally adjusted 461,000. That was a bigger drop than expected, but unemployment claims remain high by historical standards. And consumer prices were flat in September, according to the Consumer Price Index, a closely watched barometer of inflation.

Two Federal Reserve-related reports today painted a more bleak economic picture. Factory activity in the mid-Atlantic region is experiencing its largest one-month decline this month, according to the Federal Reserve Bank of Philadelphia, and the region's manufacturing executives expect no growth during the next six months. Also, the Federal Reserve reported today that industrial production fell 2.8 percent in September, the biggest plunge since December 1974.

"While the collapse in the U.S. housing sector and simultaneous drop in consumer confidence has prompted U.S. manufacturers to cut back sharply this summer, it has been the recent banking crisis and credit freeze that has turned the manufacturing recession into a outright collapse," said Michael Woolfolk, senior currency strategist for Bank of New York Mellon, in a research note this morning.

The collapse in industrial production parallels the sizable drop in retail sales released yesterday, punctuating the onset of a recession, analysts said. Retail sales in September took their steepest monthly decline in three years, according to a report released yesterday. Those concerns were amplified by Nation Retail Federation survey today showing that consumers planned to increase holiday-related shopping by 1.9 percent this year, a paltry sum that is the smallest increase since the survey began in 2002.

Investors have also been spooked by the impact of the financial crisis on many firm's balance sheets and their outlook through the rest of the year. Merrill Lynch, which is being acquired by Bank of America, reported a $5 billion loss during its third quarter this morning, while Citigroup reported a loss of $2.8 billion. Both firms have been battered by the credit crisis.

Merrill Lynch was basically flat, registering a 0.6 percent gain, and Citigroup was down 2 percent.

The financial crisis also continues to help drive down crude oil prices as the economic turmoil saps demand. The price of oil fell 6 percent, or $4.55, to $70 a barrel today. Before yesterday, oil had not traded below $75 a barrel in more than a year. But with demand dwindling, many analysts now expect prices to fall to as little as $50 a barrel.

The financial crisis also continues to churn overseas. Swiss authorities moved to stabilize financial giant UBS today, agreeing to move $60 billion in troubled assets from the company's books into a special government-backed fund.

Foreign markets were down. London's FTSE 100 and the CAC 40 in Paris were down more than 5 percent, and Germany's DAX fell 6.7 percent today. But the losses were larger in Asia as the Nikkei stock average in Japan closed down more than 11 percent.