May 8, 2010 in Business

Market sliding toward correction

Seth Sutel Associated Press
 

NEW YORK – The stock market’s wild ride may not be over yet.

The Dow Jones industrials whipsawed again Friday, a day after their largest one-day plunge. The average was down as much as 279 points in the morning, went briefly into the black around lunchtime, then ended with a loss of 139.

Not quite as terrifying as the brief 1,000-point plunge the day before, but still extraordinarily volatile. It’s normal for markets to trade erratically a day after such a disruptive move, but analysts are divided over whether stocks are in the process of finding a bottom or whether too many investors are too spooked to get back in.

“It’s a pile of uncertainty … We don’t have any more clarity than we did yesterday,” said Art Hogan, chief market analyst at Jefferies & Co. in Boston. “We’re going to have investors who are less inclined to be in this marketplace until we get some clarity.”

The Dow dropped 5.7 percent for the week, while the S&P 500 fell 6.4 percent and the Nasdaq was down 7.9 percent.

Traders were still anxious amid lingering questions about what caused Thursday’s sudden drop. Several possibilities were being investigated but as of late Friday no clear explanation had emerged.

The week’s losses would put the market well toward what analysts call a correction, usually defined as a drop of between 10 percent and 20 percent following a sustained rise. The Dow is now 7.4 percent off its recent high of 11,205.03 reached on April 26. The S&P 500 is down 8.7 percent from its recent high of 1,217.28 reached April 23.

“We were in the midst of a pullback, we needed one, we got one,” said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc. Cardillo said the choppy trading after such a drastic decline likely signals the market trying to find a bottom.

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