Subdued economy dampens stocks
Published: November 20, 2009, 12:30 am
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NEW YORK — Signs of a subdued economic recovery sent investors out of stocks Thursday and in search of safer assets like the dollar.
Major indexes tumbled about 1 percent, including the Dow Jones industrial average, which lost 94 points but ended well off its low. Energy and material stocks logged some of the biggest losses, as a jump in the dollar sent commodity prices tumbling. Meanwhile, an analyst’s downgrade of the chip industry pulled technology shares sharply lower.
Tech stocks could get hit again today following a report from Dell Inc. that sales of its computers to big businesses remain sluggish. After the closing bell, the company posted quarterly revenue and profits that fell short of analysts’ forecasts. Dell shares slid 6 percent in after-hours trading.
As stocks fell, investors flocked to the dollar and Treasurys. The yield on the three-month T-bill, considered one of the safest investments, tumbled to its lowest level since December. The Chicago Board Options Exchange’s Volatility Index, also known as Wall Street’s fear gauge, rose more than 4 percent.
Overseas markets also fell sharply.
The day’s trade was a shift out of riskier assets and back into safe havens like the dollar and Treasurys. After amassing significant gains during an eight-month rally in stocks, investors are hesitant to take on too many risks as the year ends, worried that the economy’s rebound might not be sustainable.
“Large money managers, going into the end of the year, are looking to protect their gains and are shifting assets,” said Adam Gould, senior portfolio manager at Direxion Funds in New York.
Analysts warn that the dollar’s rise Thursday doesn’t necessarily mark the beginning of a long-term move. Record- low U. S. interest rates could continue to weigh on the dollar.
Jon Biele, head of capital markets at Cowen & Co., said investors are searching for direction.
“There are a lot of questions out there and not a lot of answers. When you don’t have the right information, you don’t do anything,” he said.
The Dow fell 93.87, or 0.9 percent, to 10,332.44, after being down as much as 170. It was the Dow’s biggest point drop since Oct. 30.
The broader Standard & Poor’s 500 index fell 14.90, or 1.3 percent, to 1,094.90, while the Nasdaq composite index fell 36.32, or 1.7 percent, to 2,156.82.
The Russell 2000 index of smaller companies fell 14.47, or 2.4 percent, to 585.68.
Bonds rallied as stocks fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.34 percent from 3.37 percent late Wednesday. The yield on the three-month T-bill was flat at 0.02 percent after falling as low as 0.005 percent.
The ICE Futures US dollar index, which measures the dollar against other major currencies, gained 0.3 percent, weighing on commodities. Gold inched higher, while oil prices dropped $2.12 to settle at $77.46 a barrel on the New York Mercantile Exchange.
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