After quick rebound, stocks sink again
NEW YORK – A growing conviction that the U.S. is headed toward recession sent Wall Street plunging Tuesday, with weak retail sales figures and disappointing results from Citigroup Inc. exacerbating investors’ pessimistic mood. The Dow Jones industrials tumbled nearly 280 points.
Investors backed away from stocks amid growing concerns that consumer spending will wane and contribute to an economic downturn. The latest evidence that consumers are retrenching came from the Commerce Department, which said retail sales fell in December while it also revised its November figures lower. Spending by consumers, which accounts for more than two-thirds of U.S. economic activity, has been key to staving off economic slowdowns in recent years.
There is also a growing fear that the Federal Reserve hasn’t done enough to keep the economy going – especially as investors continue to see the fallout from the summer’s subprime mortgage crisis. Citigroup, the nation’s biggest bank, announced on Tuesday a hefty $18.1 billion write-down for bad mortgage assets and slashed its dividend.
Fourth-quarter earnings reports aren’t helping matters. After the close of the market Tuesday, Intel Corp., the world’s largest chip maker, posted results below projections; the company is seen as a leading indicator for the rest of the tech sector, and other companies as well.
Brian Gendreau, investment strategist for ING Investment Management, said the market is now seeing “a decisive shift” toward a recession.
“The sectors that are outperforming are defensive plays, like consumer staples,” he said. “People don’t buy them unless you’re worried about sustained weakness.”
Investors have sold stocks sharply lower so far this year on increasing worries about the economy. The Dow fell 277.04, or 2.17 percent, to 12,501.11, the latest in a string of triple-digit slides.
Broader stock indicators also lost ground. The Standard & Poor’s 500 index dropped 35.30, or 2.49 percent, to 1,380.95, and the Nasdaq composite index lost 60.71, or 2.45 percent, closing at 2,417.59.
Tuesday’s trading more than wiped out Monday’s triple-digit gain in the Dow, and showed the depths of the market’s pessimism. Both the Dow and S&P 500 are almost 12 percent below their October highs, while the S&P 500 is off nearly 15 percent from its high in November.
A 10 percent drop from a market high is considered a correction.
The Russell 2000 index of smaller companies fell 15.05, or 2.11 percent, to 697.43.
Overseas, Japan’s Nikkei stock average fell 0.98 percent. Britain’s FTSE 100 closed down 3.06 percent, Germany’s DAX index fell 2.14 percent, and France’s CAC-40 lost 2.83 percent.