By Brendan Conway Of DOW JONES NEWSWIRES AUGUST 8, 2011,
NEW YORK (Dow Jones)--U.S. stocks tumbled in a Monday rout that sent the Dow Jones Industrial Average plunging to the sixth biggest point drop in its history, reflecting a toxic brew of investor fears over government debt and the chances that the economy will slide into another recession.
The Dow Jones Industrial Average sank 634.76 points, or 5.55%, to 10809.85, falling beneath 11000 for the first time since November and adding to last week's steep losses. The blue-chip measure ended exactly on session lows in the biggest single-day point and percentage loss since Dec. 1, 2008.
Monday was the stock market's first trading day since Standard & Poor's downgraded the federal government's credit rating late Friday. Investors fled risk assets far and wide. They traded 9.71 billion shares in New York Stock Exchange composite volume, the fourth largest single-day total in history.
Most-active December gold futures soared to a record settlement of $1,713.20, up $61.40. U.S. Treasurys were a winner despite the credit downgrade, with the yield on the 10-year note falling to the lowest levels since January 2009.
"Everybody is looking for whatever they perceive as a safe haven, even if it's just plain illogical," said David Kelly, chief market strategist for J.P. Morgan Funds. "Things are pretty dismal right now."
Major stock indexes cascaded lower throughout much of the session, as S&P downgraded clearing bodies, entities such as Fannie Mae and Freddie Mac and lowered outlooks for companies including Warren Buffett's Berkshire Hathaway following S&P's downgrade of U.S. credit to double-A-plus from triple-A late Friday.
The Standard & Poor's 500 stock index tumbled 79.92 points, or 6.66%, to 1119.46, the 10th decline in 11 sessions. Financial components fell 10% while S&P 500 energy stocks slumped 8.3%. Not a single component of the 500 stocks that make up the broad index finished in positive territory. The Nasdaq Composite slumped 174.72 points, or 6.9%, to 2357.69.
The Russell 2000 index of small-capitalization stocks fell the most in a single session in its history, plummeting 63.67 points, or 8.91%, to 650.96. Small caps tend to make more exaggerated moves and are generally viewed as riskier than the widely held shares of large companies.
The fact that Monday's swoon came right on the heels of the Dow's biggest weekly point loss since the financial crisis in 2008 set up many market participants for forced sales and margin calls, traders said. That made some of the losses self-perpetuating. It also raised the prospect of capitulation, the point when losses snowball and sentiment craters, helping markets find a bottom.
"There is a lot of forced liquidation," said Lorenzo Di Mattia, manager of Sibilla Global Fund, and such actions "might last another day perhaps."
In one early sign that Monday's action would be volatile, the New York Stock Exchange invoked the little-used Rule 48 before the start of trading. The procedure lets market makers refrain from disseminating price indications ahead of the bell, making it easier and faster to open trading in the stock market.
Bank of America plunged $1.66, or 20%, to 6.51, to lead blue-chip decliners, stung by both a steep selloff in financial stocks and by word that American International Group is suing the company, along with a host of other prominent financial institutions, as it seeks to recover losses on mortgage-backed securities. AIG's stock fell 2.52, or 10%, to 22.58.
Gold miners and precious-metals exchange-traded funds bucked the broader trend as they followed the precious metal higher. AngloGold Ashanti rose 20 cents, or 0.5%, to 42.01 and SPDR Gold Trust gained 5.37, or 3.3%, to 167.12. Newmont Mining gained early but ended down 28 cents, or 0.5%, at 54.13.
President Barack Obama did little to assuage investor fears Monday afternoon as he said that the S&P downgrade should provide a "renewed sense of urgency" to tackle the deficit. Indexes hit fresh lows while the president spoke, and again afterward.
Worries about the strength of the global economy loomed just as large, if not larger, than credit matters for many investors. Fears of a slowdown have reverberated in recent weeks.
"The market is probably more concerned with the economic risk than with the S&P credit rating," said Bernie McDevitt, vice president of institutional trading at Cheevers & Co.
- DJIA plunges more than 634 points, closing at lows in first trading since S&P downgrade late Friday
- "Panic" selling is seen; President Obama cites "renewed sense of urgency" to handle deficit, cannot quell market worries
- S&P's follow-on downgrades stoke further worries; Russell 2000 stages its biggest-ever single-day point drop
NEW YORK (Dow Jones)--U.S. stocks tumbled in a Monday rout that sent the Dow Jones Industrial Average plunging to the sixth biggest point drop in its history, reflecting a toxic brew of investor fears over government debt and the chances that the economy will slide into another recession.
The Dow Jones Industrial Average sank 634.76 points, or 5.55%, to 10809.85, falling beneath 11000 for the first time since November and adding to last week's steep losses. The blue-chip measure ended exactly on session lows in the biggest single-day point and percentage loss since Dec. 1, 2008.
Monday was the stock market's first trading day since Standard & Poor's downgraded the federal government's credit rating late Friday. Investors fled risk assets far and wide. They traded 9.71 billion shares in New York Stock Exchange composite volume, the fourth largest single-day total in history.
Most-active December gold futures soared to a record settlement of $1,713.20, up $61.40. U.S. Treasurys were a winner despite the credit downgrade, with the yield on the 10-year note falling to the lowest levels since January 2009.
"Everybody is looking for whatever they perceive as a safe haven, even if it's just plain illogical," said David Kelly, chief market strategist for J.P. Morgan Funds. "Things are pretty dismal right now."
Major stock indexes cascaded lower throughout much of the session, as S&P downgraded clearing bodies, entities such as Fannie Mae and Freddie Mac and lowered outlooks for companies including Warren Buffett's Berkshire Hathaway following S&P's downgrade of U.S. credit to double-A-plus from triple-A late Friday.
The Standard & Poor's 500 stock index tumbled 79.92 points, or 6.66%, to 1119.46, the 10th decline in 11 sessions. Financial components fell 10% while S&P 500 energy stocks slumped 8.3%. Not a single component of the 500 stocks that make up the broad index finished in positive territory. The Nasdaq Composite slumped 174.72 points, or 6.9%, to 2357.69.
The Russell 2000 index of small-capitalization stocks fell the most in a single session in its history, plummeting 63.67 points, or 8.91%, to 650.96. Small caps tend to make more exaggerated moves and are generally viewed as riskier than the widely held shares of large companies.
The fact that Monday's swoon came right on the heels of the Dow's biggest weekly point loss since the financial crisis in 2008 set up many market participants for forced sales and margin calls, traders said. That made some of the losses self-perpetuating. It also raised the prospect of capitulation, the point when losses snowball and sentiment craters, helping markets find a bottom.
"There is a lot of forced liquidation," said Lorenzo Di Mattia, manager of Sibilla Global Fund, and such actions "might last another day perhaps."
In one early sign that Monday's action would be volatile, the New York Stock Exchange invoked the little-used Rule 48 before the start of trading. The procedure lets market makers refrain from disseminating price indications ahead of the bell, making it easier and faster to open trading in the stock market.
Bank of America plunged $1.66, or 20%, to 6.51, to lead blue-chip decliners, stung by both a steep selloff in financial stocks and by word that American International Group is suing the company, along with a host of other prominent financial institutions, as it seeks to recover losses on mortgage-backed securities. AIG's stock fell 2.52, or 10%, to 22.58.
Gold miners and precious-metals exchange-traded funds bucked the broader trend as they followed the precious metal higher. AngloGold Ashanti rose 20 cents, or 0.5%, to 42.01 and SPDR Gold Trust gained 5.37, or 3.3%, to 167.12. Newmont Mining gained early but ended down 28 cents, or 0.5%, at 54.13.
President Barack Obama did little to assuage investor fears Monday afternoon as he said that the S&P downgrade should provide a "renewed sense of urgency" to tackle the deficit. Indexes hit fresh lows while the president spoke, and again afterward.
Worries about the strength of the global economy loomed just as large, if not larger, than credit matters for many investors. Fears of a slowdown have reverberated in recent weeks.
"The market is probably more concerned with the economic risk than with the S&P credit rating," said Bernie McDevitt, vice president of institutional trading at Cheevers & Co.
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