Fears over economy and Saudi Arabia hit markets

FEARS about the economy and unrest in Saudi Arabia darkened the outlook for equities yesterday, pushing major indexes below key technical levels.

The Dow’s worst day in seven months came after reports that authorities in Saudi Arabia had opened fire on demonstrators, increasing anxiety about instability in major oil producing nations.

All three major indexes fell below their 50-day moving averages, a sign of deteriorating market strength.

Sellers came out in force, with volume at 9.07bn shares, above last year’s daily average of 8.47bn shares.

“The market just needed a catalyst. It was so extended,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. “I think this is the beginning of something severe.”

Energy stocks were the biggest drag after recent gains. The S&P’s energy sector lost 3.6 per cent, with Exxon Mobil also down 3.6 per cent, even as crude oil rallied off its lows of the day.

The Dow Jones industrial average fell 228.48 points, or 1.87 per cent, to end at 11,984.61. The Standard & Poor’s 500 Index lost 24.91 points, or 1.89 per cent, to end at 1,295.11. The Nasdaq Composite Index dropped 50.70 points, or 1.84 per cent, to close at 2,701.02.