- Title: USA: U.S. stocks sink on recovery fears, financials.
- Date: 31st October 2009
- Summary: NEW YORK CITY, NEW YORK, UNITED STATES (FILE) (REUTERS) VARIOUS OF SHOPPERS
- Embargoed: 15th November 2009 12:00
- Location: Usa
- Country: USA
- Topics: Economic News
- Reuters ID: LVAKSQFIPOMX3VC2VTZDBZNDVNU
- Story Text: The Dow industrials index suffers its worst slide since July on concerns the economic recovery won't be robust enough to sustain the seven-month stock rally.
The Dow Industrials Index suffered its worst slide since July on Friday (October 30) on concerns that the economic recovery won't be robust enough to sustain the seven-month stock rally, while financials sank on renewed worries about Citigroup's balance sheet.
Investors unloaded shares across the board on the day that marked the end of the fiscal year for many mutual funds, putting the S&P 500 on the brink of a correction.
Wall Street's favorite measure of investor fear, the CBOE Volatility Index, soared 24 percent -- its biggest one-day percentage gain since October 2008 -- and the Dow had its worst day since July.
The Dow Jones industrial average slid 249.85 points, or 2.51 percent, to end at 9,712.73. The Standard & Poor's 500 Index tumbled 29.92 points, or 2.81 percent, to 1,036.19. The Nasdaq Composite Index dropped 52.44 points, or 2.50 percent, to close at 2,045.11.
Both the S&P 500 and the Nasdaq snapped seven straight months of gains. For the week, the Dow fell 2.6 percent, the S&P 500 lost 4 percent and the Nasdaq declined 5.1 percent. For the month, the Dow was unchanged, the S&P 500 shed 2 percent and the Nasdaq slid 3.6 percent.
Citigroup fell 5.1 percent to 4.09 dollars (USD) after accounting expert Robert Willens, an independent consultant, said the bank was likely to have a 10 billion dollar (USD) fourth-quarter charge on its deferred tax assets.
The KBW bank index fell 5 percent, while the S&P financial index lost 4.8 percent. Other sectors taking a beating were technology, industrials and materials, which had all led the market's run-up since March.
All 30 Dow stocks finished in the red, with JPMorgan the top drag with a drop of 5.8 percent to 41.77 dollars (USD), followed by Exxon Mobil Corp, off 3.1 percent at 71.67 dollars (USD).
On Nasdaq, Apple Inc, the iPhone maker, lost 4 percent to 188.50 dollars (USD), while Google Inc, the Web search leader, declined 2.7 percent to 536.12 dollars (USD).
The market's slide, coinciding with technical glitches on the New York Stock Exchange, wiped out Thursday's gains, which represented the best one-day rally for stocks in three months.
Meanwhile, U.S. consumers cut spending in September and turned gloomier this month, underscoring the fragility of the economy's recovery even as signs emerged that manufacturing may be picking up.
The Commerce Department said on Friday consumer spending fell 0.5 percent last month, the largest drop since December, after a 1.4 percent increase in August. The decline, which was in line with market expectations, followed the end of a government incentive program to boost auto sales.
Michael Dueker, Head Economist at Tacoma, Washington-based investment firm Russell Investments, explains why he thinks there is a lack of consumer confidence.
"I think a lot of people are getting fairly bad news about what their salary increase is going to be for 2010 right now, that's part of what's holding back consumer sentiment right now," says Michael Dueker, Head Economist at Tacoma, Washington-based investment firm Russell Investments.
That sentiment was echoed on the streets of New York City Friday, as consumers voiced concerns over the volatility of the stock market and credit freeze.
"Everybody is a little insecure, you've got the stock market going up and down 100 points today, and that didn't used to happen, it used to go up five points every day, and so there's a lot to be concerned about," says one man in New York City.
"I'm in the construction industry, development and it's very tough to get construction loans right now, I don't think it's over, I don't think it's going to be over until the first quarter of next year," said another man on the street.
Data next Friday is expected to show the U.S. unemployment rate rose to a new 26-year high of 9.9 percent this month from 9.8 percent in September. However, job losses are expected to slow to 175,000 from the 263,000 lost in September.
Despite the fall in disposable income, Americans saved more money last month. Savings increased to an annual rate of 355.6 billion dollars (USD), lifting the savings rate to 3.3 percent from 2.8 percent in August.
The spending report also showed a key inflation gauge monitored closely by the Fed, the price index for personal spending excluding food and energy, rose only 1.3 percent over the last 12 months, matching August's increase -- which was the slowest since September 2001.
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