Dow Jones industrial average posts triple-digit loss for third straight day
The stock market sank into its worst three-day slide Friday since the depths of last year’s financial crisis as investors fretted about President Obama’s bank regulation plan and Ben S. Bernanke’s future as chairman of the Federal Reserve.
The Dow Jones industrial average tumbled more than 200 points -- its third triple-digit loss in a row and the fourth in the last five days. The index has fallen 5.2% since its peak Tuesday and is now down 2.1% for the year.
Friday’s losses were broad-based, with technology and financial stocks leading the fall, on concerns about the global economy being dragged down by other forces.
The daylong slide intensified in the afternoon after rumors circulated that Bernanke might resign as Fed chairman next week if the Senate did not quickly approve his renomination to a second term.
Several Democratic senators said Friday that they would vote against Bernanke. That unsettled Wall Street, which gives him generally good marks for having steered the economy through the financial crisis.
“Most people on Wall Street believe Bernanke did a very good job and that he is probably among the better people to have in the role,” said Sam Stovall, chief investment strategist at Standard & Poor’s Corp. “And they question who else they would put in there.”
The Dow fell 216.90 points, or 2.1%, to 10,172.98. It had reached a 15-month high of 10,725.43 Tuesday.
The Standard & Poor’s 500 index dropped 24.72 points, or 2.2%, to 1,091.76, while the tech-heavy Nasdaq composite index fell the hardest, deflating 60.41 points, or 2.7%, to 2,205.29.
It was the Dow’s worst three-day drop since the market’s furious sell-off early last March, which marked the bottom of the bear market. A powerful rally has since recouped much of the monstrous losses on Wall Street.
The Dow is now at its lowest point since early November. However, it’s still up 55% since the March trough.
The intensity of the sell-off raised the specter that stocks could be succumbing to the first correction in the market’s 10-month upturn.
“It could be a correction, but I don’t see it as a [fundamental] shift in the fortunes of this market,” said Jack Ablin, chief investment officer of Harris Private Bank in Chicago.
The concern over Bernanke’s future at the Fed stirred anger at what Wall Street believes is consistent meddling in their business by politicians who are trying to score points with voters.
Investors are grappling with Obama’s plan to place tough trading restrictions on major banks, continuing concerns about China’s effort to slow down its fast-paced economic growth and worries that Greece and other debt-laden European governments could be in danger of defaulting on their bonds.
“When you get a one-two-three punch -- banks, China and sovereign debt -- investors are worrying right now that that could mean derailing global economic growth and the stock market’s recovery,” Stovall said.
Stocks whose fortunes are tethered to the economy -- such as building materials, industrial and energy -- fell sharply this week.
Tech stocks suffered Friday from disappointing revenue figures at Google as well as a Citigroup analyst’s downgrading of shares of KLA-Tencor in Milpitas, Calif., and other companies that make equipment for semiconductor manufacturing. Many tech companies’ shares had risen strongly in recent weeks.
The three-day sell-off caught many investors by surprise, in part because it’s coming at a time when many companies are reporting sterling fourth-quarter profits.
Yet some stocks are being hammered anyway as the results fall short of investors’ even more optimistic projections.
Shares of Google Inc., for example, fell 5.6% on Friday after the Internet search giant beat profit estimates but reported revenue that was less than what some analysts expected. The shares lost $32.97 to close at $550.01.
In other cases, shares are falling after investors dig into the numbers and conclude that the results aren’t as bullish as they appear on the surface
Shares of American Express tumbled 8.5% in part because fourth-quarter gains stemmed from lower loan-loss reserves rather than fundamental improvement in underlying conditions. Also, an analyst downgraded the stock, citing the new, stricter credit card regulations.
