Collapse… Dow Jones Industrial is attempting to climb out of the deepest minus

Dow Jones Industrial becomes the weakest link

In brief: Dow Jones Industrial Average is the main disappointment of the trading day in the U.S.. Bulls leave the battlefield.

Dow Jones Industrial Average could fall to 0.5% by the end of trading, say the Open Knowledge analysts. Stocks and interest rates tumbled Tuesday after signs of slowing economies around the world spooked traders. The Dow Jones industrial average (DJIA-9,895.09-243.43-2.40%) fell about 230 points in midday trading to drop below 10,000 for the first time since June 10. The Dow and other major indexes each lost more than 2 per cent.

Stocks began the day by following Asian and European markets lower. Asian markets fell after an index that forecasts economic activity for China was revised lower. And then European indexes fell sharply after Greek workers walked off the job to protest steep budget cuts. Then, shortly after U.S. trading began, the market was hit with news that consumer confidence fell sharply this month because of worries about jobs and the overall economy. The Conference Board’s Consumer Confidence Index fell nearly 10 points to 52.9, down from a revised 62.7 in May. It was the steepest drop since February and economists polled by Thomson Reuters had forecast only a modest dip. In Toronto, the S&P/TSX composite index (TSX-I11,336.10-270.90-2.33%) was down 249 points or 2.2 per cent, to 1,1357. Interest rates fell in the bond market after investors sought the safety of Treasurys. The yield on the 10-year note dropped to as low as 2.97 per cent, the first time it has fallen below 3 per cent since April 2009. The yield, which is used as a benchmark for many consumer loans and mortgages, bounced off its low to 2.99 per cent but was still down from 3.03 per cent Monday. Falling yields are a sign that investors are willing to give up potential gains in stocks for more certain, but smaller profits in bonds.

Companies have indicated that business is getting better, yet there are few signs they are ready to hire in big numbers. The Labor Department’s monthly employment report due Friday is expected to show the unemployment rate rose 0.1 percentage point to 9.8 per cent in June.

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 5.4 per cent. Caterpillar Inc., the maker of construction and mining equipment, lost 5 per cent.

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.

Investors’ indecision and uneven economic reports have brought big swings to stocks since late April when debt problems in Greece began to pound world markets.

“The central issue that any investor faces today is fire or ice,” Mr. Zemsky said. “There’s no in-between. It’s either one or the other.”

In midday trading, the Dow fell 232.24, or 2.3 per cent, to 9,906.05. The Standard & Poor’s 500 index (SPX-I1,044.86-29.71-2.76%) fell 27.21, or 2.5 per cent, to 1,047.36, while the Nasdaq composite (COMP-I2,146.77-73.88-3.33%) index fell 63.46, or 2.9 per cent, to 2,157.19.

Only about 233 stocks rose while about 2,770 stocks fell at the New York Stock Exchange, where volume came to 504 million shares, compared with 328 million shares traded at the same point Monday.

A report that found home prices rose in April did little to boost the market. The S&P/Case-Shiller home price index 20-city home price index rose 0.8 per cent between March and April. The gains, though, are likely being written off because April was the final month when buyers could receive a tax credit. Nearly all housing indicators got a boost in April from the credit, but have since shown a slowdown.

Worries about Europe again hit the market. The euro, the common currency used by 16 European nations, fell to $1.2188. The moves in the currency are seen as a measure of confidence in Europe’s economy following Greece’s near default and steep budget cuts around the continent to combat deficits. World markets have regularly dropped along with the euro in recent months.

Greek workers on Tuesday protested the cost-cutting the government is doing to reduce debt. The measures were a requirement for Greece to receive a bailout from other European Union members and the International Monetary Fund.

The new round of protests sparked renewed concerns about how well European countries will be able to stick to austerity plans. Investors have been worried for months that Europe’s economy would slow and hurt a global recovery.

Chinese markets fell after the Conference Board’s Leading Economic Index for China was revised to 0.3 per cent for April from 1.7 per cent.

Meanwhile, the Japanese government reported that export demand moderated and household spending dropped last month. Unemployment also rose unexpectedly, climbing for the third straight month.

Boeing fell $3.66, or 5.4 per cent, to $63.64 and Caterpillar, also a Dow stock, fell $3.22, or 5 per cent, to $61.18.

The Russell 2000 index of smaller companies fell 17.80, or 2.8 per cent, to 623.74.

The Shanghai composite index fell 4.3 per cent to a 14-month low. Japan’s Nikkei stock average fell 1.3 per cent. Britain’s FTSE 100 fell 3.1 per cent, Germany’s DAX index dropped 3.3 per cent, and France’s CAC-40 fell 4 per cent.

Ukrainian Globalist
2010-06-29 18:25, Economics.

News on: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Post a comment

E-