Dow closes down 634 points after final plunge
This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.
The Dow Jones industrial average finished the day down 634.76 points Monday after a full-day sell-off accelerated in the final hour of trading as investors struggled to absorb Standard & Poor’s decision to downgrade the United States’ credit rating.
[Updated, 1:34 p.m. Aug. 8: This post has been updated to reflect the final closing numbers of the Dow Jones industrial average.]
Investors piled out of stocks and into a few ‘safe havens,’ such as gold and Treasury bonds. The appetite for Treasury bonds suggests that the Standard & Poor’s downgrade has not shaken investors’ faith in U.S. bonds.
Market experts said the Monday sell-off was sparked by the S&P announcement but was motivated more by growing concerns about the weakness of the global economy.
‘It’s really all about economics,’ said Mike Norman, the chief financial strategist at John Thomas Financial.
The Dow ended the day down 634.76 points, or 5.5%, to 10,809.85. The broader Standard & Poor’s 500 index fell even more sharply, finishing the day down 79.83 points, or 6.6%, to 1,119.55.
‘It’s been harried,’ said Sal Arnuk, head of Themis Trading, which has its trading floor in Chatham, N.J.
The concern about the U.S. credit rating was amplified when Standard & Poor’s announced Monday morning that it was also downgrading the debt of mortgage giants Fannie Mae and Freddie Mac, which rely on U.S. government guarantees. But traders said much of the pessimism Monday resulted from broader concerns about the economy.
‘I don’t think the S&P announcement is the lead director of the day -- I just think it is the icing on the cake,’ said Jonathan Corpina, a trader on the New York Stock Exchange for Meridian Equity Partners.
Markets have fallen nearly every day for the last two weeks and are now down to levels last reached in September of last year.
With the United States’ credit rating cut by Standard & Poor’s, Treasury bonds might have been expected to lose some of their luster. But investors still appear to be using Treasuries as a haven amid global economic turmoil. The 10-year Treasury bond was trading at a 2.34% yield, down from 2.56% on Friday, indicating that there was heavy demand for the bonds.
Gold, another haven, saw its value rise 3.7% on Monday, to a record $1,710.20 an ounce.
-- Nathaniel Popper in New York