tocks suffered their worst day in nearly a month yesterday as concern about the stalemate in US budget talks and growing debt problems in the Eurozone prompted investors to hedge against further losses.
The S&P 500 dropped nearly 2 per cent on concerns that Europe’s debt crisis would spread to Italy. European officials were still struggling to solve Greece’s fiscal problems as Italy’s markets have been roiled by worry about its banks.
“Today’s decline is not necessarily the start of a correction, but suggests we are in for a wild ride this week,” said Randy Frederick, director of trading and derivatives at the Schwab Center for Financial Research in Austin, Texas.
The Eurozone’s woes added another layer of uncertainty to the stock market already rattled by Friday’s exceptionally weak jobs report.
“What’s happening today is something that should have happened on Friday. The disappointing jobs report on Friday on top of all the concerns on budget talks and Europe” have prompted the sell-off, Frederick said.
While investors still consider it unlikely there will be no deal on the debt, the lack of resolution at a time of growing international concerns weighed on sentiment. The CBOE Volatility Index or VIX, Wall Street’s barometer of investor anxiety, spiked 15.3 per cent.
The Dow Jones industrial average was down 151.44 points, or 1.20 per cent, at 12,505.76 at the close. The Standard & Poor’s 500 Index was down 24.31 points, or 1.81 per cent, at 1,319.49. The Nasdaq Composite Index was down 57.19 points, or 2.00 per cent, at 2,802.62.
The S&P 500, which lost its gains for the month, was near its 100-day and 50-day moving averages, both around the 1,316 level. The Dow and the Nasdaq remained modestly in the plus column.
Dashing hopes for a deal on larger-than-expected spending cuts to tame the US budget deficit, a highly anticipated Sunday meeting broke little new ground as President Barack Obama and congressional Republicans kept sparring over taxes. In a press conference, Obama called for the largest possible deficit-reduction deal. For details, see
After the bell, Alcoa, often viewed as a US economic bellwether, posted a big jump in second-quarter profit partly due to soaring prices for aluminum and its raw material alumina. The Dow component’s stock rose 0.3 per cent to $15.96 in late trading.