Tags: Stocks | Fall | Weak | Economy

Investor Gloom Deepens on Global Slowdown, Europe Woes

Thursday, 18 Aug 2011 09:40 AM

U.S. stocks took a fresh beating on Thursday, fueled by growing fears that the world is one step closer to falling back into recession if it's not there already.

The Dow Jones Industrial Average fell 419.63 points, or 3.68 percent, to close at 10,990.58 on weaker than expected news from the jobs front, revived inflation fears, unsettling export data out of Japan and mounting debt concerns in Europe. The S&P 500 sank 4.46%.

"If it's not a recession, it sure feels like one. And if it feels like one, it doesn't matter if you can prove it with statistics or not," John Hailer, president and CEO of Natixis Global Asset Management in the U.S. and Asia, tells the Wall Street Journal.

"We have some real tough problems in front of us, and we really need some leadership in corporate America and Washington. ... There's a lot of nervousness in the market."
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A string of negative economic indicators flew off the wire Thursday.
Some 408,000 people applied for unemployment benefits in the past week, up from 399,000 the week before and the most in four weeks, according to government data. Inflation at the consumer level rose 0.5 percent in July, the highest since March, thanks to higher fuel prices, the Associated Press reports.

Manufacturing weakened in the Philadelphia region, according to a report from the Federal Reserve, another closely-watched economic indicator. And lastly, the National Association of Realtors said sales of previously occupied homes dropped in July for the third time in four months.

In Japan, July exports fell 3.3 percent from a year earlier to $75.6 billion, the government reported Thursday, the AP adds. It was the fifth straight month in decline.

Those figures, some say, served as the opening act for the main event on the world stage: the European debt crisis.

Concerns persist that possible defaults in troubled European economies like Greece could spark a run on banks elsewhere in Europe and eventually the world, which would jeopardize an already frazzled U.S. banking sector and send the global economy into recession similar to what the Lehman Brothers crisis did in 2008.

"Europe is the big question in the market, and nobody really knows what happens from here," says Scott Brown, chief economist at Raymond James, according to the AP.

The Wall Street Journal, meanwhile, has reported that the New York Federal Reserve is keeping a closer eye on the U.S. operations of European banks to make sure the banks are prepared for a crisis.

"The fact that the New York Federal Reserve is actually talking to the U.S. operations of some of these European banks is in the course of business," says Art Hogan of Lazard Capital Markets, according to CNBC.

"What's pointed out in the Wall Street Journal is what's obvious to us. We are concerned about European banks, sure. Are they going to need to raise capital? Will they all be solvent at the end of the day? These stories go back and forth, and until we know the answers to that, we're going to try to price worse case scenarios into stocks. Right now the markets are going through the process of concerns."

Amid such gloom, some traders and analysts say investors should avoid selling, especially when everyone is doing it, and wait to cherry pick opportunities that pop up soon.

"What we're having right now is panic, indiscriminate selling. History has proven these are not the days that you want to be selling on," Art Hogan, managing director at Lazard Capital Markets, tells CNBC. "These are the days you want to sit back and...make your wish list and look for those opportunities where stocks got washed out in this baby-out-with-the-bathwater environment."

Many investors, meanwhile, fled to gold and Treasuries.
Gold for December delivery ended at $1,823 an ounce, up $29.20, or 1.6 percent, after hitting a record high $1,829.70 per ounce, according to the Associated Press.

Yields on the benchmark 10-year Treasury note briefly dipped below 2 percent in intraday trading for the first time since at least 1954, as investors sought refuge in U.S. debt while stocks plummeted, according to the Wall Street Journal.

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U.S. stocks took a fresh beating on Thursday, fueled by growing fears that the world is one step closer to falling back into recession if it's not there already. The Dow Jones Industrial Average fell 419.63 points, or 3.68 percent, to close at 10,990.58 on weaker than...
Stocks,Fall,Weak,Economy
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2011-40-18
Thursday, 18 Aug 2011 09:40 AM
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