Stocks plunge on Europe's woes
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Stock markets tumbled deeper into negative territory Thursday in response to the ongoing economic crisis in Europe and worsening economic conditions in the United States that have investors worried that the world could be headed back into a recession.
The Dow Jones Industrial Average had its worst day since the financial meltdown of 2008, losing 513 points to close at 11,383.68. The S&P 500 fell for the eighth time in nine days, to 1,200.07, marking a 10 percent decline from its intraday high reached on May 2.
"It doesn't matter that corporate profits are at an all-time high right now, or that more than 78 percent of the S&P 500 companies have posted positive earnings this quarter," said Jonas Elmerraji, a senior market analyst for Agora Financial in Baltimore.
"Ultimately, the market can easily shed some more points in the short-term," he said.
Investors raced out of equities for the safety of U.S. treasuries and gold, which hit an intraday record high of $1,681 an ounce before pulling back to about $1,650.
The two-year Treasury yield dropped to a record low of 0.29 percent from 0.34 percent as investors rushed in seeking a safe haven for their money. Bond yields fall when more investors demand them and are willing to accept lower yields to avoid losing money.
Investors' lack of faith in the economy came on the heels of a congressional deal to increase the nation's debt ceiling earlier this week that narrowly sidestepped the ugly economic scenario that probably would have resulted from the government defaulting on its debt.
But lawmakers' battles and their willingness to push the deadline may have put too much pressure on the emotions of consumers, said Michael D. Kresh, president of M.D. Kresh Financial Services in Islandia, N.Y.
"There's now a fear our government won't be able to move forward rationally to help us keep out of a second recession," Mr. Kresh said.
With domestic manufacturers reporting a slowdown and the global economic situation looking weak, the market sell-off may be a sign that investors are starting to let fear take hold of their financial decisions.
That fear is unlikely to dissipate if the nation's unemployment picture does not improve substantially.
Weekly applications for unemployment benefits slid by 1,000 to a seasonally adjusted 400,000, its lowest level in four months, the Labor Department reported Thursday. The decline in applications for unemployment benefits suggests that fewer employees are being laid off. The report came a day before the government was scheduled to release the July employment figures, a number that market watchers will be studying closely.
First Published August 5, 2011 12:00 am
