- Title: USA: U.S. stocks plummet on recession fears
- Date: 23rd September 2011
- Summary: CHICAGO, ILLINOIS, UNITED STATES (SEPTEMBER 22, 2011) (ORIGINALLY 4:3) (REUTERS) (SOUNDBITE) (English) PAUL LARSON, CHIEF EQUITIES STRATEGIST, MORNINGSTAR, SAYING: "The market is basically very worried about a sovereign debt crisis emanating from Europe. You might say that the market is worried about September 2011 turning into something that we had in September 2008 with Greece basically playing the role of Lehman Brothers."
- Embargoed: 8th October 2011 13:00
- Keywords:
- Location: Usa, Usa
- Country: USA
- Topics: Economic News,Politics
- Reuters ID: LVA9QAW9J3ENLIGYFLD570RM4GZU
- Story Text: Stocks plunged on Thursday (September 22), extending a selloff to four days, as policymakers' failure to arrest global economic stagnation sent markets spiraling downward.
The heavy volume of Thursday's plunge signaled investors are selling in anticipation of more losses. Wall Street's "fear gauge," the CBOE Volatility Index, jumped 12 percent, giving the index its biggest 2-day percentage spike in a month as investors protected against more losses to come.
"The market is basically very worried about a sovereign debt crisis emanating from Europe. You might say that the market is worried about September 2011 turning into something that we had in September 2008 with Greece basically playing the role of Lehman Brothers," said Paul Larson, Chief Equities Strategist at Morningstar.
When investment bank Lehman Brothers Holdings Inc failed in September 2008, its debt and counterparty obligations created shockwaves throughout the global financial system.
The Dow Jones industrial average dropped 391.01 points, or 3.51 percent, to 10,733.83. The Standard & Poor's 500 Index lost 37.20 points, or 3.19 percent, to 1,129.56. The Nasdaq Composite Index slid 82.52 points, or 3.25 percent, to 2,455.67.
Energy and materials shares were among the hardest hit areas on worries of slowing worldwide demand. Signs of a slowdown in China fed those fears.
Weak data from China followed an unsettling outlook about the U.S. economy from the Federal Reserve on Wednesday in stoking recession fears. The previous session's losses were sparked after the Fed said it saw "significant downside risks" facing the economy.
China's once-booming manufacturing sector contracted for a third consecutive month, while the euro zone's dominant service sector shrank in September for the first time in two years.
Those searching for positive market signs could point to the benchmark S&P 500 index holding above 1,120, seen as a key technical support level which could trigger more selling if broken.
Volume of about 13.03 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq was well above the daily average of 7.8 billion.
U.S. crude oil futures tumbled more than 6 percent, the biggest one-day percentage drop in six weeks.
The PHLX oil service sector index tumbled 6.6. Schlumberger slid 6 percent to 61.22. The S&P materials index fell 5.5 percent, with miner Freeport-McMoRan Copper & Gold Inc off 9.7 percent to $32.14 (USD).
Banks also lost ground with the KBW bank index off 2.7. Citigroup shares were down 6.1 percent to $23.96. The Fed's plan to lower long-term rates will compress margins for banks that borrow at short-term rates and lend at longer-term rates. The declines also came a day after Moody's cut debt ratings for big lenders.
FedEx Corp, considered to be an economic bellwether, slumped 8.2 percent to $66.58 after the world's No. 2 package delivery company pared its outlook for the full year.
In addition to the statement on Wednesday, the U.S. central bank detailed additional stimulus measures to help push down long-term rates. Investors worried the latest plan would have little effect on lending and that there appeared to be few solutions to sluggish worldwide demand.
Near the close, traders exchanged about 1.05 million option contracts in the S&P 500 Index as 2.78 puts were in play for each call, according to Trade Alert. That put to call ratio was up from the 22-day moving average of 1.77.
Declining stocks outnumbered advancing ones on the NYSE by 2,724 to 343, while on the Nasdaq, decliners beat advancers 2,230 to 353. - Copyright Holder: REUTERS
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