Share this article

print logo

Host of gloomy economic reports sends markets hurtling downward

Relentlessly gloomy reports about the health of the world economy rocked Wall Street on Thursday, stirring more worry about the stalled recovery and sending the stock market to its second-worst decline this year.

The bad economic reports kept piling up: Manufacturing slumped in China; a closely watched unemployment figure jumped to its highest level in nine months; sales of previously owned homes fell. Then came word of a manufacturing slowdown in China, followed by a sharp contraction in Northeast manufacturing, the worst since last August.

Suddenly, the outlook turned so bad that a Goldman Sachs analyst told clients to place bets against the stock market.

"The news has been horrible out there," said Uri Landesman, president of Platinum Partners. "The U.S. economy is slowing down. And China's growth is definitely under question."

The Dow started sinking after the Philadelphia branch of the Federal Reserve reported a manufacturing slowdown resulting from a steep drop in companies' orders. Then the losses just accelerated.

Mining and other companies that made basic materials fell hard after prices for commodities such as copper and oil dropped.

Elsewhere, the Labor Department reported that the four-week average of applications for unemployment benefits jumped to the highest level since September. The National Association of Realtors also reported that sales of previously owned homes dropped 1.5 percent in May.

All this unfolded a day after the Federal Reserve slashed its estimates for U.S. economic growth and said it would extend a bond-buying program through the end of the year. The moves disappointed investors who had hoped for bolder steps from the central bank to get the economy going again.

"What's worse is that things are getting weaker without the Fed coming in," said Rex Macey, chief investment officer at Wilmington Trust Investment Advisors. "We had a run-up in the market this month because people had been expecting Fed action. Today, the market is giving it back."

The Dow lost 250.82 points to close at 12,573.57, a drop of 2 percent.

The Standard & Poor's 500 index lost 30.18 points to 1,325.51, a decline of 2.2 percent. The Nasdaq composite fell 71.36 points, 2.4 percent, to 2,859.09. All three indexes lost their gains for the week.

The report on slowing manufacturing in China was troubling since that country has helped drive global economic growth over the past four years. China is a major importer of copper and other basic materials.

The only good news was apparently at the pump. The price of oil fell Thursday to its lowest level in almost nine months -- $78.20 a barrel. Gasoline was way down, too, at $3.47 a gallon, 46 cents below its peak in early April. Experts say it could dip to $3.30 by July 4th.

There are no comments - be the first to comment