Housing, job and durable-goods worries send stocks down
The stock market tumbled Thursday, giving up almost all of the gains it made the day before, as fresh despair over the faltering economy set in.
The Dow Jones industrial average fell more than 200 points, and financial stocks resumed their decline.
A litany of dreary reports on housing sales, jobless claims and durable-goods orders reinforced fears that corporate earnings would continue to suffer as the economy contracts.
Sales of new homes last month fell 15% from November on a seasonally adjusted basis, the number of people receiving jobless claims hit a new record last week and orders for big-ticket items sank 2.6% in December.
A day earlier, the Dow rose 200 points on reports that the Obama administration was considering the creation of an entity to buy toxic assets from banks in the hope of cleansing their balance sheets, allowing for more new loans to be made.
But that was outweighed by the reality of a still-flailing economy.
“The problem is we’re rallying on intangibles,” said Jack Ablin, chief investment officer of Harris Private Bank in Chicago. “We’re seeing pullbacks on ugly tangible information like earnings and economic data, and rallies fueled only by hope.”
The stock market is unlikely to muster a sustained rally until companies finish reporting fourth-quarter earnings, Ablin said.
Though investors had expected ugly profit figures, the daily grind of disappointing reports has further sapped confidence.
The Dow finished down 226.44 points, or 2.7%, at 8,149.01.
The Standard & Poor’s 500 index gave up 28.95 points, or 3.3%, to close at 845.14 -- forfeiting Wednesday’s entire advance.
The Nasdaq composite index fell 50.50 points, or 3.2%, to 1,507.84.
Financial stocks led the way down after leading the way up Tuesday and Wednesday. Shares of Bank of America slid 8.3%, and Citigroup lost 7.1%. An index of financial companies in the S&P; 500 slumped 8.4%.
Insurers were big losers. Allstate sank 21% after a $1.1-billion fourth-quarter loss raised fears of a dividend cut. Lincoln National dropped 18% and Prudential Financial slumped 15%.
Eastman Kodak tumbled 29% to its lowest price in decades after the photography giant reported a fourth-quarter loss and announced the elimination of as many as 4,500 jobs.
Shares of Amazon.com jumped in after-hours trading after the online retailer posted higher fourth-quarter sales and profit.
Yields on long-term Treasury securities continued their recent climb. The 10-year Treasury note rose to 2.81% from 2.65% on Wednesday. The 30-year T-bond jumped to 3.56% from 3.43%.
Barring a surprise rally today, stocks are likely to finish in the red for the month, an ominous sign for investors who believe in the so-called January Barometer. It holds that the market’s performance in January usually foreshadows how it will fare the rest of the year.
The Dow is down 7.2% this month and the S&P; 500 is off 6.4%. Foreign stock markets have fallen by similar amounts.
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