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Stocks fall on concerns about global economy
Source: Agencies |
February 26, 2010, Friday
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STOCKS fell yesterday but closed well off their lows as investors set aside some of their concerns about Greece's rising debt.
The recovery came as the dollar pulled back from an early spike. The dollar is seen as a safe investment. So its retreat signals that by the end of the day, investors had lost some of their fears about Greece's debt problems hurting other countries.
The Dow Jones industrial average closed down 53 points after having fallen 188. Treasury prices, like the dollar, rose as investors sought safety.
The early slide came as the possibility of downgrades of Greece's debt fanned worries that financial troubles there will spread to other countries. The euro fell and touched a nine-month low against the dollar. Stocks often get hit when the dollar jumps because commodity prices often fall. A drop in commodity prices hurts energy and materials stocks.
Concerns about Greece have dogged investors this year but grew after credit rating agencies Standard & Poor's and Moody's said they might further downgrade the country's debt. That would make it harder for the country to borrow.
An unexpected rise in first-time claims for unemployment insurance added to the sour mood that dominated trading early in the day and raised concerns that the labor market will worsen.
The Labor Department said first-time claims for unemployment insurance rose by 22,000 to a seasonally adjusted 496,000. Economists polled by Thomson Reuters had forecast a drop in claims.
It was the second straight week that claims rose unexpectedly. High unemployment remains one of the biggest obstacles to a sustained economic recovery. The Labor Department's monthly report on employment will be released next week.
Trading in the U.S. has been choppy in recent weeks because of uneasiness about the economy. Global markets retreated earlier this month because traders were worried about Greece's debt problems. The market's drop early in the week, a rebound and the latest slide signal that investors are waiting for clearer information on the direction of the economy.
Justin Golden, a strategist at Macro Risk Advisors in New York, said there is an undercurrent of worry about long-term issues like debt in Greece. The presence of the concerns means it doesn't take much to rattle investors.
"It's a statement of how fragile the markets really are," Golden said.
The Dow fell 53.13, or 0.5 percent, to 10,321.03. The broader Standard & Poor's 500 index slipped 2.30, or 0.2 percent, to 1,102.94. The Nasdaq composite index fell 1.68, or 0.1 percent, to 2,234.22.
Bond prices rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.64 percent from 3.70 percent late Wednesday.
Crude oil fell US$1.83 to US$78.17 per barrel on the New York Mercantile Exchange. Gold rose.
The drop in major stock indexes masks the broad improvement in the market. For much of the day, all 30 stocks that make up the Dow were lower. In the end, five turned higher. Aluminum producer Aloca Inc. was the biggest gainer, rising 25 cents, or 1.9 percent, to US$13.31.
The Chicago Board Options Exchange's Volatility Index, which is known as the market's fear gauge, ended down 0.8 percent after jumping 11.9 percent in morning trading. A rise in the VIX signals that investors are expecting swings in the market.
By the closing bell there were slightly more advancing stocks than decliners on the New York Stock Exchange. Earlier five stocks were down for every one that rose.
Jim Maguire Jr., a trader at E.H. Smith Jacobs in New York, said he expects the market to continue in the tight range it has seen this year as investors look for clues about the pace of an economic rebound.
"There is a feeling out there that this is not a self-sustaining economy as of yet and there is this expectation that the stock market is going to falter because of it," he said.
Maguire said questions about how quickly the rebound will occur is keeping traders from placing big bets after a year of enormous gains in stocks. The Dow hit a 12-year low in March last year.
"Ultimately, I think we're looking at a consolidation here and I think it could be a very long haul," he said. "The characteristics of that are typically these types of choppy markets. We get these updrafts and downdrafts."
Stocks broke a two-day losing streak on Wednesday after Federal Reserve Chairman Ben Bernanke said in a semiannual report to Congress that the central bank plans to keep interest rates low to help the economy. There was little reaction to his similar testimony before the Senate on yesterday.
Advancing stocks narrowly outpaced those that fell on the NYSE, where volume came to 1.1 billion shares compared with 1 billion Wednesday.
The Russell 2000 index of smaller companies rose 0.03, or less than 0.1 percent, to 630.46.
The recovery came as the dollar pulled back from an early spike. The dollar is seen as a safe investment. So its retreat signals that by the end of the day, investors had lost some of their fears about Greece's debt problems hurting other countries.
The Dow Jones industrial average closed down 53 points after having fallen 188. Treasury prices, like the dollar, rose as investors sought safety.
The early slide came as the possibility of downgrades of Greece's debt fanned worries that financial troubles there will spread to other countries. The euro fell and touched a nine-month low against the dollar. Stocks often get hit when the dollar jumps because commodity prices often fall. A drop in commodity prices hurts energy and materials stocks.
Concerns about Greece have dogged investors this year but grew after credit rating agencies Standard & Poor's and Moody's said they might further downgrade the country's debt. That would make it harder for the country to borrow.
An unexpected rise in first-time claims for unemployment insurance added to the sour mood that dominated trading early in the day and raised concerns that the labor market will worsen.
The Labor Department said first-time claims for unemployment insurance rose by 22,000 to a seasonally adjusted 496,000. Economists polled by Thomson Reuters had forecast a drop in claims.
It was the second straight week that claims rose unexpectedly. High unemployment remains one of the biggest obstacles to a sustained economic recovery. The Labor Department's monthly report on employment will be released next week.
Trading in the U.S. has been choppy in recent weeks because of uneasiness about the economy. Global markets retreated earlier this month because traders were worried about Greece's debt problems. The market's drop early in the week, a rebound and the latest slide signal that investors are waiting for clearer information on the direction of the economy.
Justin Golden, a strategist at Macro Risk Advisors in New York, said there is an undercurrent of worry about long-term issues like debt in Greece. The presence of the concerns means it doesn't take much to rattle investors.
"It's a statement of how fragile the markets really are," Golden said.
The Dow fell 53.13, or 0.5 percent, to 10,321.03. The broader Standard & Poor's 500 index slipped 2.30, or 0.2 percent, to 1,102.94. The Nasdaq composite index fell 1.68, or 0.1 percent, to 2,234.22.
Bond prices rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.64 percent from 3.70 percent late Wednesday.
Crude oil fell US$1.83 to US$78.17 per barrel on the New York Mercantile Exchange. Gold rose.
The drop in major stock indexes masks the broad improvement in the market. For much of the day, all 30 stocks that make up the Dow were lower. In the end, five turned higher. Aluminum producer Aloca Inc. was the biggest gainer, rising 25 cents, or 1.9 percent, to US$13.31.
The Chicago Board Options Exchange's Volatility Index, which is known as the market's fear gauge, ended down 0.8 percent after jumping 11.9 percent in morning trading. A rise in the VIX signals that investors are expecting swings in the market.
By the closing bell there were slightly more advancing stocks than decliners on the New York Stock Exchange. Earlier five stocks were down for every one that rose.
Jim Maguire Jr., a trader at E.H. Smith Jacobs in New York, said he expects the market to continue in the tight range it has seen this year as investors look for clues about the pace of an economic rebound.
"There is a feeling out there that this is not a self-sustaining economy as of yet and there is this expectation that the stock market is going to falter because of it," he said.
Maguire said questions about how quickly the rebound will occur is keeping traders from placing big bets after a year of enormous gains in stocks. The Dow hit a 12-year low in March last year.
"Ultimately, I think we're looking at a consolidation here and I think it could be a very long haul," he said. "The characteristics of that are typically these types of choppy markets. We get these updrafts and downdrafts."
Stocks broke a two-day losing streak on Wednesday after Federal Reserve Chairman Ben Bernanke said in a semiannual report to Congress that the central bank plans to keep interest rates low to help the economy. There was little reaction to his similar testimony before the Senate on yesterday.
Advancing stocks narrowly outpaced those that fell on the NYSE, where volume came to 1.1 billion shares compared with 1 billion Wednesday.
The Russell 2000 index of smaller companies rose 0.03, or less than 0.1 percent, to 630.46.
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