The Kansas City Star (Sunday) - - RINGING UP RUMORS BUSINESS - By TIM PAR­ADIS

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...

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