NEW YORK (AP) - Just when Wall Street seemed to have settled
down, a barrage of bad economic reports collided with fresh worries
about European banks Thursday and triggered a global sell-off in
The Dow Jones industrial average fell 419 points - a return to
the wild swings that gripped the stock market last week.
Stocks were only part of a dramatic day across the financial
markets. The price of oil fell more than $5, gold set another
record, the government's 10-year Treasury note hit its lowest
yield, and the average mortgage rate fell to its lowest in at least
The selling began in Asia, where Japanese exports fell for a
fifth straight month, and continued in Europe, where bank stocks
were hammered because of worries about debt problems there, which
have proved hard to contain.
On Wall Street, the losses wiped out much of the roughly 700
points that the Dow had gained over five days. Some investors who
bought in the middle of last week decided to sell after they were
confronted with a raft of bad news about the economy:
- More people joined the unemployment line last week than at any
time in the past month. The number of people filing claims for
unemployment benefits rose to 408,000, or 9,000 more than the week
- Inflation at the consumer level in July was the highest since
March. More expensive gas, food, clothes and other necessities are
squeezing household budgets at a time when most people aren't
- Sales of previously occupied homes fell in July for the third
time in four months - more trouble for a housing market that can't
seem to turn itself around. This year is on pace to be the worst
since 1997 for home sales.
- Manufacturing has sharply weakened in the mid-Atlantic states,
according to a report from the Federal Reserve. Manufacturing has
been one of the strongest parts of the economy since the recession
ended in 2009, but its growth has slowed this year.
The manufacturing news was especially bleak on an already bad
day, said Dan Greenhaus, chief global strategist at brokerage BTIG.
He called the Fed report "an atrocious set of numbers."
"That really set the market on its head," he said.
Wall Street and other financial markets have wrestled for
several weeks with fears that a new recession might be in the
offing. Morgan Stanley economists said in a report Thursday that
the U.S. and Europe are "dangerously close to recession."
"It won't take much in the form of additional shocks to tip the
balance," they wrote.
Worries about European debt also hang over the market. A default
by any country would hurt the European banks that hold its bonds,
plus American banks that have lent to their European counterparts.
Renewing the fears, The Wall Street Journal reported Thursday
that U.S. regulators are looking at the U.S. arms of big European
banks to make sure they have enough money for day-to-day
"I don't want to pretend that the market knows what it's
thinking about too much," said David Kelly, chief market
strategist at JPMorgan Funds. "We live in an environment of sell
now and ask questions later."
Asian markets started Thursday's drop. Japan's Nikkei 225 index
fell 1.3 percent. The main stock indexes in South Korea and India
each dropped a little more, then Europe more than that - 4.5
percent in Britain and 5.8 percent in Germany.
In the United States, the Dow fell 419.63 points, or 3.7
percent, to 10,990.58. The Standard & Poor's 500 index fell 53.24,
or 4.5 percent, to 1,140.65. The Nasdaq composite fell 131.05, or
5.2 percent, to 2,380.43.
The Dow is down 13.6 percent since stocks began falling July 21
- four weeks that have rattled Americans watching their retirement
savings and other investment accounts shrivel.
Lee Applegate, a retired sales executive from Cincinnati,
watched the latest market plunge uneasily but said he was planning
to stay the course with his investments. He and his wife have
several retirement accounts.
He remembers the mistake he made in pulling his money out of
stocks in early 2009, just before the market started its two-year
surge. Since March 9 of that year, the S&P 500 is up 68.6 percent.
"I think things are going to get worse before they get
better," Applegate said. "But I'm still going to ride it out."
The selling Thursday was immediate. The Dow plunged from the
opening bell and was down 528 points about a half-hour into
trading. It essentially moved sideways for the next six hours.
New York Stock Exchange volume was 6.2 billion shares - busy for
a summer day, but not as busy as during the worst of the selling
earlier this month, when volume sometimes hit 9 billion.
Last week was one of the wildest in Wall Street history. The Dow
moved more than 400 points on four straight days for the first
time. But stocks had been relatively stable this week because
investors were calmed by strong earnings reports.
The Dow fell 76 points Tuesday and rose four points Wednesday -
the first time in nearly three weeks that the average rose or fell
by less than 100 points on two straight days.
That ended Thursday. And with stocks down big, money flooded
into U.S. Treasurys and gold, both considered safer investments.
The yield on the 10-year Treasury note briefly fell below 2
percent for the first time. It hit 1.98 percent before rising to
2.07 percent. Investors are willing to accept a lower return on
their money in exchange for safety.
The price of gold reached yet another high - $1,829.70 per
ounce. Gold keeps setting records because some investors are looking
for stability and others are simply looking to cash in.
The price of oil fell $5.20 to $82.38 per barrel after the
economic reports raised concern among traders that demand for
gasoline would fall. One survey this week found Americans have
already cut back on gas 21 weeks in a row.
And the average rate on a 30-year fixed mortgage fell to its
lowest on record. The rate on the most popular mortgage hit 4.15
percent - just below the 4.17 percent reached last November. The
last time long-term rates were lower was in the 1950s, when 30-year
loans weren't widely available.
Nicole Sherrod, a managing director at broker T.D. Ameritrade,
said the market volatility has led more clients to put automatic
protections in place to sell a stock or an investment fund once it
falls below a certain value.
"Our clients are saying that this is not a buy and hold
market," she said. "This is a buy and protect market."
In addition, computer systems that are programmed to analyze
charts, capitalize on tiny changes in price and execute trades with
no human intervention are making the market rougher.
High-frequency trading programs make up about half of the
trading volume in a normal market day but 70 percent or more on a
(Copyright 2011 by The Associated Press. All Rights Reserved.)