Stocks on Wall Street declined steeply on Thursday, following the trend set in Asia and Europe, amid heightened concerns over the impact of the euro zone debt crisis sweeping through the financial sector and over the wavering United States economy.þþþThe markets in the United States opened sharply lower and continued to slide, with the broader market as measured by the Standard & Poor’s 500-stock index down more than 4 percent within the first hour. The Dow Jones industrial average was down about 450 points, or 4 percent, and the Nasdaq was down nearly 5 percent. Major indexes in Europe were down 3 to 5 percent.þþFinancial stocks were down more than 5 percent, as were energy, industrials and other key sectors.þþThe yield on the Treasury’s 10-year note fell below 2 percent to a record low as investors turned to the safety of fixed-income securities.þþThe sharp drop in the equities market comes amid a period of high volatility that has been accentuated by low volumes, concerns over the euro zone sovereign debt concerns and its potential impact on the banking sector, and recent data that has economists lowering their outlooks for global economic growth.þþEconomic reports issued after the markets opened in New York accelerated the decline that had originated in the markets in Europe. A monthly survey by the Federal Reserve Bank of Philadelphia showed that factory activity in the mid-Atlantic region plummeted in August, indicating contraction and falling to the lowest level since March 2009.þþAt the same time, the National Association of Realtors said home sales fell 3.5 percent last month to a seasonally adjusted annual rate of 4.67 million homes. This year’s pace is lagging behind last year’s total sales, which were the weakest in 13 years.þþIn addition, initial jobless claims in the last week reached a rate of 408,000, above the previous week and exceeding analysts expectations.þþAt the same time, the Labor Department said consumer prices rose in July at the fastest rate in four months.þþThe selloff in stocks on Thursday was also driven by the Fed’s comments regarding the state of Europe, said Lawrence Creatura, portfolio manager at Federated Investors. “The Fed for the first time in 19 years is really quite divided in some of their voting and communications.”þþMr. Creatura was referring to remarks made by Charles I. Plosser, president of the Federal Reserve Bank of Philadelphia, who said Wednesday, in a report by Bloomberg, that the Fed would probably need to raise interest rates before mid-2013 and that policy makers should have waited to see how the economy performs before pledging to hold rates at record lows for two years.þþ“It was inappropriate policy at an inappropriate time,” Mr. Plosser said in a Bloomberg radio interview in New York.þþMr. Plosser’s statement came after the rare promise made earlier this month by the Federal Reserve in which it pledged to hold short-term interest rates near zero through at least the middle of 2013.þþ“Now even the Fed, who are meant to be the pilots navigating us through this turbulence, seem to be divided,” Mr. Creatura said.þþMr. Creatura also said that the weekly unemployment figures were “dispiriting” and the specter of low economic growth and rising prices had emerged from the recent reports on consumer and wholesale prices.þþBut while the economic data weighed on the markets, it was mostly euro zone troubles that overwhelmed them.þþ”I think the economic numbers, combined with further problems in the euro zone, is hitting a market that was prone to selling anyway, so fundamentally you are not getting good news,” Alan B. Lancz, president of Alan B. Lancz & Associates Inc., said.þþ“It is a situation where buyers have nothing to hang their hat on, and sellers have taken control once again,” Mr. Lancz said.þþAsked about the financial sector, he said that concerns over the capital levels in European banks would lead to scrutiny of how much exposure to them banks in the United States have.þþHe said the aftermath of the meeting between the leaders of Germany and France, the euro zone’s two largest economies, earlier in the week failed to meet the expectations of the market for sufficient action in addressing the euro debt crisis.þ
Source: NY Times
