- The Washington Times - Tuesday, September 1, 2009

U.S. stocks posted their best August since 2000 but ended the month down slightly after Chinese stocks plunged, leading to concern that markets have risen too far, too fast given economic conditions.

The Dow Jones Industrial Average fell 47.92, or 0.5 percent, to 9,496.38, it’s biggest point decline in two weeks. The S&P; 500 Index fell 8.31, or 0.8 percent, to 1,020.62. The tech-heavy Nasdaq Composite Index fell 19.71, or 1 percent, to 2,009.06. The Russell 2000 Index of small-cap stocks fell 7.79, or 1.3 percent, to 572.07.

The Shanghai Composite Index, the worst-performing market in the world last month with a 22 percent drop, fell nearly 7 percent Monday to 2,667.75, its sharpest decline in more than a year.

The worst may be yet to come.

Former Morgan Stanley Asian economist Andy Xie told Bloomberg Television that the index — already in bear-market territory — could fall another 25 percent because China’s economic recovery isn’t “sustainable.”

Investors have become concerned that lending curbs may stall the world’s third-largest economy. Mr. Xie said the index “should be 2000 or less.”

“The market is in deep bubble territory,” said Mr. Xie, 49, who forecast correctly two years ago that Chinese stocks would tumble.

Other analysts are more upbeat.

China is “a bright spot” among global markets because of its superior growth potential, analysts at Goldman Sachs Group Inc. wrote in a research note.

“We think the market concerns about a near-term ‘exit strategy’ appear premature as the government remains pro-growth,” analysts Thomas Deng and Kinger Lau wrote.

Monday’s U.S. share decline was broad, led by the stocks of materials and energy companies. Crude oil prices fell $2.78 to $69.96 a barrel on the New York Mercantile Exchange. Copper prices fell more than 4 percent. Gold fell, while the dollar rose.

For the month, the Dow rose 3.5 percent, the S&P; 500 Index added 3.4 percent and the Nasdaq rose 1.5 percent.

Since plunging to a 12-year low on March 9, the Dow has rebounded 45 percent and the Nasdaq has recouped 58 percent. The S&P; 500 is up 51 percent, its best run since 1938.

Japan’s Nikkei stock average fell 0.4 percent Monday after a landslide opposition victory. Germany’s DAX Index fell 0.9 percent, while France’s CAC-40 lost 1.1 percent. The London Stock Exchange was closed for a holiday.

The yield on the benchmark 10-year Treasury note, which moves in the opposite direction from its price, fell to 3.41 percent from 3.45 percent late Friday as investors sought safety in government securities.

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