STOCKS SKID ON RENEWED FEARS OF GLOBAL SLOWDOWN
NThe outlook for growth in China is dampened. In the U.S., consumer confidence takes a hit.
No matter where they look, investors are seeing economic trouble. Stocks and interest rates plunged Tuesday after signs of slowing economies from China to the U.S. spooked traders uneasy about a global recovery. The Dow Jones industrial average fell 268 points, or 2.7 percent to close at 9,870.30, its lowest close since June 7.
During the last hour, the Dow was down 326.60. It has fallen 428 points, or 4.2 percent, in the past four days.
The Standard & Poor’s 500 index dropped 3.1 percent to its lowest level since October.
Interest rates fell in the Treasury market on demand for the safety of government debt. The yield on the 10-year note dropped to 2.95 percent, the first time it has fallen below 3 percent since April 2009, when the markets were in the early stages of recovery from the finan- cial crisis. The yield is used as a benchmark for many consumer loans and mortgages.
The markets began the day by following Asian and European stocks lower. Asian exchanges fell after an index that forecasts economic activity for China was revised lower. European stocks continued the slide after Greek workers walked off the job to protest steep budget cuts.
Then, shortly after U.S. trading began, news came that consumer confidence fell sharply this month because of worries about jobs and the overall economy. The Confer- ence Board’s Consumer Confidence Index fell to 52.9 from a revised 62.7 in May. It was the steepest drop since February.
Investors are also anxious as they wait for the Labor Department’s monthly employment report on Friday. Companies have indicated that business is getting better, yet there are few signs that they are ready to hire in big numbers.
Industrial stocks suffered some of the steepest drops on fears that a stalled global rebound will cut demand. Aircraft maker Boeing Co. led the Dow lower with a drop of 6.3 percent. Caterpillar Inc., the maker of construction and mining equipment, lost 5.5 percent. Shares of coal producers pulled energy stocks lower on worries about a slowdown.
Investors have been so burned by the financial crisis of 2008-09 that they fear any hint of a slowdown means the economy will start tanking again.
Paul Zemsky, head of asset allocation at ING Investment Management in New York, said investors are wrestling with two opposing ideas of where the economy is headed. He said the more likely case is that the recovery continues and corporate earnings growth make stocks look cheap right now.
The darker scenario is that government budget cuts, the end of fiscal stimulus, problems in Europe and a slowdown in China lead to a double-dip in the global economy.
“The central issue that any investor faces today is fire or ice,” Zemsky said. “There’s no in-between. It’s either one or the other.”
Trading could continue to be volatile today, which is the final day of the quarter and the first half. For some traders, it’s the last day of their fiscal year.
Trading monitors on the floor of the New York Stock Exchange bore grim tidings Tuesday for traders such as David Pologruto (left) and Christopher Capella. During the last hour of trading, the Dow was down 326 points but rebounded somewhat by the close...