- The Washington Times - Tuesday, September 1, 2009

Wall Street fell sharply Tuesday, the third straight day of losses amid investor concerns that slow economic growth will not support the markets’ six-month rally.

The Dow Jones Industrial Average closed at 9,310.60, down 185.68 points. The broader Standard & Poor’s 500 Index closed at 998.04, down 22.58 points, and the tech-heavy Nasdaq Composite Index closed at 1,968.89, down 40.17 points. The losses translate to a roughly 2 percent drop in major markets in the United States and abroad.

Stock prices have rallied more than 50 percent since hitting 12-year lows in early March, largely based on corporate earnings that reflect cost-cutting, not growth.

The drop Tuesday “tells us the rosy scenario is priced into the markets and we need more evidence of top-line growth,” said Brian Lipps, a Charles Schwab & Co. Inc. branch manager in Alexandria and Washington.

The markets dropped despite an Institute for Supply Management report showing U.S. manufacturing increased in August for the first time since January 2008 and a National Association of Realtors report showing pending home sales increased 3 percent in July, the sixth straight monthly gain.

Bond prices rose as investors tried to protect their money by switching from stocks to government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.37 percent from 3.40 percent late Monday.

Oil prices also fell despite the upbeat manufacturing report. The price of light, crude closed down $1.91, to $68.05 a barrel, on the New York Mercantile Exchange.

The dollar fell against other major currencies while gold prices increased.

Tuesday’s stock market plunge is in keeping with historical data that show September is the worst month for Wall Street.

President Obama took time from a late-afternoon White House press conference to comment on the manufacturing report and offer encouragement about the recession, which started in December 2007.

“For the first time in 18 months, monthly manufacturing has expanded,” he said. “This means greater production of transportation equipment like cars and electronic equipment like computers and appliances. And it means these companies are starting to invest more and produce more. And it is a sign that we’re on the path to economic recovery. There’s no doubt that we have a long way to go.” Some investors also suspect the positive housing and manufacturing numbers were bolstered temporarily by government stimulus money, including the popular “Cash for Clunkers” program.

Mr. Lipps said any impact that stimulus money had on the markets also was priced long ago and that he doesn’t believe in a September curse — at least not on the month’s first day of trading.

In overseas trading, Japan’s Nikkei stock average gained 0.36 percent, while Britain’s FTSE 100 dropped 1.82 percent, Germany’s DAX index dropped 2.51 percent and France’s CAC-40 dropped 1.92 percent.

China’s Shanghai Composite Index rose 0.6 percent after dropping 6.7 percent Monday amid concerns about that country’s economy. The drop resulted in a worldwide selloff Monday.



Click to Read More

Click to Hide