As hopes for a quick recovery dim, the bears are coming back to Wall Street.þþResurgent fears about a long economic downturn and an anemic recovery pounded financial markets on Monday, dragging stocks broadly lower in their largest one-day sell-off since late April, The New York Times’s Jack Healy reported.þþA report by the World Bank highlighted fears that the world was not ready to snap back from the worst recession since World War II. The bank, cutting its outlook, predicted that the global economy would shrink 2.9 percent this year before rebounding in 2010. It also said that the world was “entering an era of slower growth” that demanded tighter oversight of the financial system.þþThe report said international trade would fall sharply and unemployment would bleed from industrial economies to those in export-dependent economies in East Asia. It said that economies of high-income countries like the United States and those of the European Union would contract 4.2 percent this year and grow slower than developing economies in the next two years.þþSeparately, the White House predicted on Monday that unemployment would hit 10 percent in the coming months, a shift from its earlier predictions that the jobless rate would reach 8.9 percent at the end of the year. Unemployment is currently 9.4 percent.þþAll that added up to a disappointing day for investors. The Dow lost 200.72 points, or 2.35 percent, to close at 8,339.01. The broader Standard & Poor’s 500-stock fell 3.1 percent, or 28.19 points, to 893.04. The technology-geared Nasdaq was off 3.35 percent, or 61.28 points, to 1,766.19.þþ“The market’s gone too far, too fast,” Karl O. Mills, president of the investment adviser firm Jurika, Mills & Keifer, told The Times. “It’s writing checks that the recovery can’t cash.” On Monday, some of those checks bounced.þþ“Basically it’s a reality check,” Gerhard Schwarz, an equity strategist at Unicredit in Munich, told The Times. Optimistic investors have bid stocks up by more than 30 percent from their nadir, he said, but “there’s been a lack of confirmation that it is justified. We’re waiting for hard economic data to show the economy has turned around.”þþFinancial stocks fell significantly as investors apparently saw little difference between big banks and small ones, as well as banks that had returned government bailout funds and those that were still holding onto taxpayer money. Shares of Bank of America fell 9.7 percent, JPMorgan Chase fell 6.1 percent and Morgan Stanley was off 5.8 percent.þþShares of Apple were down 1.5 percent, to $137.37, after reports over the weekend that its chief executive, Steven P. Jobs, who has been on a medical leave since January for treatment of what he called a hormone imbalance, underwent a liver transplant two months ago.þþApple shares fell despite the company announcing that it had sold more than a million units of its latest iPhone model in the first three days.þþThe prices of commodities like crude oil, copper and gold slumped as investors faced the prospect that emerging markets and developed economies were not about to ramp up industrial production or witness a spike in levels of consumer demand and consumption.þþCrude oil futures fell $2.62, settling at $66.93 a barrel, their lowest levels in three weeks, even as discord and protests in Iran raised questions about the stability of one of the Middle East’s largest oil producers. Gasoline prices in the United States held steady at a nationwide average of $2.69 a gallon, according to AAA, the automobile club.þþThe declines in commodities pulled down energy producers like BP in London, Total in Paris and Marathon Oil and Chevron in New York. The declines also weakened companies that produce basic materials like chemicals and steel.þþAnalysts said that investors were taking a more cautious approach ahead of companies’ reports of second-quarter earnings and a meeting of the Federal Reserve this week. The Fed is expected to keep interest rates at their record low levels near zero percent, but investors will pay attention to the central bank’s statements about inflation and the success of its monetary policies.þþ“You’re seeing people lock profits in, if there are any left,” Ryan Larson, senior equity trader at Voyageur Asset Management, told The Times.þþStocks shot higher this spring after dipping to their worst levels in more than a decade, but many Wall Street analysts say investors who have dived back into the markets are ignoring fundamental problems in the economy. The S.& P. 500 is down 5 percent since earlier this month, and many analysts say the stock markets could get stuck in a broad trading range as investors look ahead toward a sluggish recovery.þþUnemployment is rising and is expected to reach 10 percent or more, even after the broader economy begins to recover. Hundreds of big and small banks across the country are still on government lifelines. And while credit markets are returning to normal after last year’s financial crisis, analysts say higher interest rates on Treasury notes and mortgages threaten to disrupt the government’s attempts to right the economy.þþInvestors are paying close attention to the bond market this week as the Treasury Department prepares to auction a record $104 billion in government notes.þþYields on the benchmark 10-year Treasury note fell to 3.68 percent from 3.78 percent on Friday, indicating higher demand for safe-haven government debt. The price, which moves in the opposite direction of yield, rose 25/32 to 95 13/32.þþ
Source: NY Times
