July 30, 2011 in Business

Sharp losses reflect edgy market

Associated Press

The word of the day in financial markets: anxious.

The Dow Jones industrial average fell nearly 100 points, its sixth straight decline, as the U.S. edged closer to a Tuesday deadline to raise the country’s borrowing limit or risk the prospect of a debt default. A dismal report on U.S. economic growth this spring also pushed stocks lower and sent the yield on the 10-year Treasury note to its lowest level of the year.

The combination of bad economic news and growing worries about a possible default was evident in nearly every measure of investor confidence:

• The S&P 500 index had its worst week in a year.

• The Dow lost 581 points over the past six days.

• All 10 industry groups in the S&P 500 stock index fell.

• Gold rose nearly 1 percent to $1,631 an ounce.

• A measure of stock market volatility, the VIX, rose 6 percent.

• The cost to protect against a U.S. default within the next year reached a record high. The cost to insure Treasurys for one year jumped 54 percent this week.

Analysts said that a spike in short-term Treasury yields provided a clear sign that the market was increasingly worried about a default. “It’s not panic, but we are pre-positioning in case something goes wrong over the weekend,” said Thomas Tzitzouris, head of fixed income research at Strategas Research Partners.

The Dow started the day sharply lower, falling to 12,083 shortly after the market opened. Stocks regained their losses after President Barack Obama said in a 10:45 statement there were many paths to a compromise on raising the debt limit. By 11:15, the Dow had briefly turned positive for the day. The Dow dripped steadily lower until its 4 p.m. close.

The yield on the benchmark 10-year Treasury note fell to 2.80 percent, its lowest level of the year. Bond yields rise when their prices fall.

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