BackWall St slips for a sixth day on growth concerns
Wall St slips for a sixth day on growth concerns
PremiumNew York: US stocks extended losses for the sixth straight day on Wednesday as investors worried that a slowing economy could deepen the market’s retreat.
The latest evidence of a slowdown came in the Federal Reserve’s Beige Book, which gives an anecdotal report on the economy. It reinforced Fed chief Ben Bernanke’s bearish assessment on growth delivered late on Tuesday.
The market’s mood soured when Bernanke gave no hint that the central bank would offer a third round of stimulus to an economy losing steam. The Beige Book said costlier food and energy prices as well as supply disruptions stemming from Japan’s earthquake were taking a toll.
Stocks are still up for the year, but the market’s recent slide has taken a big bite out of those gains.
The Dow, which on 2 May was up 10.6% for the year when it hit its 2011 closing high, is now up just 4.1%.
The S&P 500, which had climbed as much as 8.2% for the year at its 2011 closing high on May 2nd, is now up just 1.7%. And the Nasdaq, which on May 2nd was up 8% for the year when it set its 2011 closing high, is now up only 0.9%.
Stocks have come under pressure recently due to a slew of weak economic data, especially in the labor market.
“Investors are re-pricing the slowdown after Bernanke crystallized it," said Jason L. Ware, senior equity research and trading analyst at Albion Financial Group in Salt Lake City, Utah.
On top of that, “the market was hoping for an indication that there may be another round of stimulus but clearly, that’s not what they got."
The Fed’s $600 billion second round of stimulus, expected to end this month, has been a catalyst for the stock market’s advance.
Many of the day’s biggest decliners were US-traded Chinese companies after Interactive Brokers Group banned clients from borrowing money to buy some Chinese stocks.
New York-listed shares of Renren Inc fell 13.6% to $10.51 and Baidu lost 3.3% to $120.67.
Mortgage insurers’ shares also fell after MGIC Investment Corp reported disappointing monthly operating statistics.
Shares of MGIC Investment, the biggest mortgage insurer to Fannie Mae and Freddie Mac, sank 20.2% to $5.80.
The Dow Jones industrial average dropped 21.87 points, or 0.18%, to 12,048.94. The Standard & Poor’s 500 Index lost 5.38 points, or 0.42%, to 1,279.56. The Nasdaq Composite Index fell 26.18 points, or 0.97%, to 2,675.38.
“I think 1,250 is a key level (on the S&P) and, if we get there, likely to provide support for the market, barring any further erosion in the underlying economic data," Ware said.
SHARPER SLIDE FORECAST
Credit Suisse’s US equity strategist Doug Cliggott said on Wednesday the S&P 500 could fall roughly 10% from its current level, partly due to the approaching end of the Federal Reserve’s bond-buying program.
“We would think an index between 1,170 and 1,200 would be a realistic estimate of where we might be headed," Cliggott said at the Reuters Investment Outlook Summit in New York.
His comments followed a bearish tone struck on Tuesday by Citigroup strategist Tobias Levkovich. He said major U.S. stock indexes could fall as much as 10% from their May highs. A 10% fall is typically described as a market correction.
There were also signs of weakness from corporate America. Communications networking equipment provider Ciena Corp forecast third-quarter revenue below expectations, driving down its stock and others in the sector.
Ciena tumbled 16.2% to $20.29, while JDS Uniphase Corp dropped 5.5% to $17.40.
Limiting losses, the energy sector rose after talks at the oil cartel OPEC in Vienna broke down without an agreement on a production hike. The S&P 500 energy index rose 0.4%, with Exxon Mobil up 1% at $80.76.
US crude oil futures rose nearly 2% to settle above $100 a barrel.
About 7.45 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, slightly below the daily average of 7.6 billion.
Declining stocks outnumbered advancing ones on the NYSE by 2,217 to 784, while on the Nasdaq, decliners beat advancers by 1,920 to 679.
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