Stocks extend slide after factory orders report
During the painful slide in stocks that began early last fall, even many investors who expected the bear market to deepen further were counting on an extended breather before another nose dive.
But Thursday’s declines of at least 4% in major stock indexes suggest that hopes for a respite were just wishful thinking.
Disappointing news from China and the latest smattering of dreary economic reports combined to drive the major indexes to new bear-market lows.
The Dow Jones industrial average sank throughout the day to close down 281.40 points, or 4.1%, to 6,594.44.
It was the second time this week that the Dow skidded nearly 300 points and was the blue-chip barometer’s 14th loss in the last 18 trading days.
The index, which fell for six consecutive months through February, is down 6.6% in the first four sessions of March.
The Dow is now down almost 25% this year after giving up nearly 34% in 2008.
“We skipped the plateau or the uptick and just went into that second leg” down, said Art Hogan, chief market strategist at Jefferies & Co.
The Standard & Poor’s 500 index fell 30.32 points, or 4.3%, to 682.55, its lowest level since September 1996.
The Nasdaq composite index, which had been the most resilient of the major indexes, sank 54.15 points, or 4%, to 1,299.59 to the lowest level of the bear market that began in late 2007, falling under the gauge’s previous bear-market low set in late November.
Banking giant Citigroup briefly fell under $1 -- a descent into penny-stock status that would have been unimaginable even a few months ago.
The market sell-off has continued a pattern in which investors have grown ever more despondent about the prospects for an economic recovery in the foreseeable future and seem to have simply given up on stocks.
“It’s pretty ugly,” Hogan said. “Everybody’s selling everything.”
In terms of points lost, recent daily declines in the indexes have been relatively moderate compared with some of the enormous tumbles they’ve suffered over the last six months.
But in percentage terms, the losses have grown steadily larger as the value of the underlying indexes have fallen. A 281-point drop would have been less than 2% at the Dow’s peak at more than 14,000 in October 2007.
Thursday’s decline more than erased the Dow’s 149-point rally Wednesday, which broke a five-day losing streak as investors speculated that China this week would unveil more government spending to stimulate the economy.
But in a speech Thursday at the opening of a national legislative meeting, Chinese Premier Wen Jiabao suggested no new stimulus spending was necessary.
On Wall Street, financial stocks led the way down, with an index of 24 bank stocks sliding 12%.
JPMorgan Chase fell 14% after Moody’s Investors Service warned it might downgrade the bank’s debt, raising its borrowing costs. And Wells Fargo shares tumbled 16% after Moody’s said it would reassess the company’s long-term debt ratings.
Citigroup, at one time the world’s the most richly valued banking company, dipped as much as 13% to as low as 97 cents.
Although the stock recovered to $1.02 a share, it still traded for less than those of General Motors, even though GM’s stock fell 15% on Thursday to $1.86 after its auditor said the beleaguered carmaker might not survive as a going concern.
The economic reports released Thursday were generally downbeat.
Mortgage delinquencies rose to a record pace in the fourth quarter, while first-time jobless claims remained above 600,000 for the fifth week in a row. Factory orders slipped less than feared, but the 1.9% decline still marked the sixth straight monthly drop.
Stocks will get another test today when the government releases February job data. Economists estimate that payrolls shrank by 650,000 jobs last month and that the unemployment rate rose to 7.9%.
Some analysts hold out hope that stocks can bounce back strongly whenever the economy stabilizes.
“If anyone on Wall Street smells a bottom in the economy -- not a recovery but just a bottom -- then Wall Street is going to rally,” said Jim Paulsen, chief investment strategist at Wells Capital Management. “And if Wall Street rallies, economic confidence on Main Street improves even more.”
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