- The Washington Times - Tuesday, June 23, 2009

NEW YORK | A surprisingly bleak forecast for the world economy sent stocks tumbling to their lowest level this month.

Major stock indexes dropped by more than 2 percent Monday, sending the Dow Jones Industrial Average down 201 points, after the World Bank estimated that the global economy will shrink 2.9 percent in 2009. It previously predicted a 1.7 percent contraction.

Investors began buying up stocks in March on hopes that the economy was poised to begin recovering. The grim assessment from the World Bank runs counter to hopes that have been building for months that a gradual recovery was beginning.

The dampened economic outlook also weighed on the prices of oil, metals and other commodities. Those commodity price drops in turn sent energy and metal producers’ shares falling.

The stock market is coming off its first weekly loss in more than a month after mixed economic readings last week. No major economic data was released Monday, but traders will get reports this week on new- and existing-home sales, durable-goods orders, gross domestic product and personal incomes and spending.

The Federal Reserve also will be in the spotlight after its two-day meeting on monetary policy that ends Wednesday. The central bank is widely expected to hold its key funds rate steady near zero, but investors want to know whether policymakers will say the economy is recovering or still in need of aid.

The Dow fell 200.72, or 2.4 percent, to 8,339.01. The Standard & Poor’s 500 Index fell 28.19, or 3.1 percent, to 893.04, erasing the index’s advance for the year. The Nasdaq Composite Index fell 61.28, or 3.4 percent, to 1,766.19.

Last week, the Dow fell 3 percent, the S&P; 500 index dropped 2.6 percent, and the Nasdaq composite lost 1.7 percent.

Bond prices jumped Monday, pushing yields down, as the drop in stocks drove demand for the safety of government debt. The yield on the benchmark 10-year Treasury note sank to 3.70 percent from 3.78 percent late Friday.

The Fed has been buying Treasurys and other kinds of debt with the hope of keeping borrowing rates low at the same time the government has been issuing record amounts of debt. The Treasury Department is planning to auction another $104 billion in debt this week.

Benchmark crude oil for August delivery fell $2.52 to settle at $67.50 a barrel on the New York Mercantile Exchange. Gold prices also slid.

Shares of companies that produce commodities dropped. Oil company Chevron Corp. fell $2.30, or 3.4 percent, to $65.76, while aluminum producer Alcoa Inc. fell 98 cents, or 8.9 percent, to $10.02.

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