http://www.crainsnewyork.com/article/20110923/ECONOMY/110929945
Stocks waver on fears of recession
Investors are becoming more fearful that the economy is heading for another recession, after Thursday's dive. This comes during the market's worst week since October 2008.
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http://www.crainsnewyork.com/article/20110923/ECONOMY/110929945#ixzz1YrEWR1YF
Updated: September 23, 2011 2:57 p.m.
(AP) - U.S. stocks bounced between gains and declines Friday, but did little to wipe out heavy losses from a brutal week of selling or ease the fears that hammered the market.
Traders have been racked by growing fears that the economy is headed for another recession. Europe appears no closer to solving the debt crisis that threatens some of its biggest banks. U.S. political leaders are in another standoff over spending that could force the government to shut down.
Shares opened slightly lower, but turned positive in the first half-hour of trading. Later they bounced between small gains and losses.
In mid-afternoon trading, the Dow Jones industrial average dropped 22 points to 10,711. The Standard & Poor's 500 index rose 2, or 0.2%, to 1,131. The Nasdaq composite index rose 16, or 0.7%, to 2,472.
The Dow and the S&P are down more than 6% for the week. Recession fears and concerns about Europe's debt crisis led traders to abandon all investments that carry risk—from stocks to corporate bonds to commodities.
Until Friday, shares had fallen every day this week. John Merrill, chief investment officer at Tanglewood Wealth Management in Houston, said Friday's respite might not last.
"Nothing goes in a straight line, even markets that are declining steeply," he said. Mr. Merrill said the market was moderating as traders bought shares that looked like bargains after the week's selling. But he said the problems that have weighed on stocks for months now show no sign of letting up.
Bargain-seekers "bring some stability into the market for a day or two, until they've used up their buying power, then the macro issues surface again," and volatility returns to the market, he said.
The Dow has fallen more than 15% since its recent peak on July 21. It fell below its 2011 closing low of 10,719, reached Aug. 10, several times Friday morning.
Treasury yields rose slightly from record lows reached Thursday as the calmer stock market reduced traders' hunger for lower-risk bets such as Treasurys. The yield on the benchmark 10-year Treasury note rose to 1.78% from 1.73% late Thursday. Demand for Treasurys drives their prices higher and their yields lower.
Finance ministers from 20 leading economies pledged late Thursday to take "all necessary actions to preserve the stability of the banking systems and financial markets," and make sure banks have the cash they need to stay afloat.
The announcement offered no new specifics, and did little to stem selling in overseas markets. But European markets started rising shortly before U.S. markets opened. They closed with small gains.
The Dow Jones industrial average has lost 6.5% this week, its worst showing since the week ended Oct. 3, 2008. That's the week Congress struggled to pass the $700 billion bank bailout known as the Troubled Asset Relief Program.
Fears about Europe's debt crisis were stoked early Friday by news that Moody's Investors Service had downgraded eight Greek banks by two notches. The rating agency said the banks hold too much Greek debt. It said Greece's economic situation is worsening as government attempts to slash spending provoke violent protests.
Greece appears increasingly likely to default on its debts. European officials have begun to speak openly of the possibility, and the fears have roiled international markets.
Greece will run out of money in the coming weeks if it fails to convince lenders it is meeting cost-cutting goals and deserves another round of bailout money.
A default by Greece would hurt banks in Greece, France and Germany that hold billions in Greek debt. A Greek default would also increase investors' concerns about defaults by other financially troubled nations, such as Ireland, Portugal, Italy and Spain.
Europe's economy is barely growing. A financial shock could tip Europe into recession and would increase chances for a U.S. recession.
Some companies that produce commodities lost value. Range Resources Corp. declined 10.3%. Newmont Mining Corp. fell 5%. Cabot Oil & Gas Corp. lost 4.7%.
The companies' profits would shrink if economic weakness reduced demand for products such as silver, fossil fuels and industrial metals.
A sell-off in commodities continued Friday. Benchmark crude oil prices fell 0.8%, gold dropped 4.6% and silver fell 11.5%.
Traders had sold precious metals to raise cash during Thursday's sell-off, and dumped other investments that are more valuable in a growing economy, such as oil and raw materials.
Thursday's stock plunge marked the second day of steep losses since the Federal Reserve announced a new effort to boost the economy by buying long-term Treasurys. By creating extra demand for the investments, the Fed hopes to drive their yields lower. Many interest rates are based on the yield for the 10-year Treasury note. Lower interest rates might spur investment and increase lending.
The Dow Jones industrial average lost 391 points and at one point was down more than 500, a return to the volatility that gripped the market this summer. Nineteen stocks on the New York Stock Exchange fell for every one that rose.
The Dow almost matched its lowest close of the year. It would have to fall 485 more points to reach the traditional definition of a bear market—a 20% decline. The Dow was at 12,810 on April 29.
©Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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http://www.crainsnewyork.com/article/20110923/ECONOMY/110929945#ixzz1YrEeukH6
hopefully...
:p
