Dow closes below 10000 for first time in three months
Concerns about the ability of Greece, Spain, and Portugal to pay their debts caused the Dow Jones Industrial average to drop more than 100 points, closing below 10000 for the first time since early November.
New York — The Dow Jones Industrial Average has dropped below 10000 for the first time since early November.
The Dow’s drop on Monday of 104 points to close at 9908 was precipitated in part by overseas worries. Concerns over the ability of Greece, Portugal, and Spain to pay off their debts spread to worries about the holding of that debt by European banks. That has led to rising insurance premiums to insure the debt of those countries against default.
“For some investors, looking at that pattern brought back memories of Lehman Brothers,” says Fred Dickson, chief market strategist at D.A. Davidson in Lake Oswego, Ore. “Of course, Greece can raise taxes. Lehman Brothers had no options.”
While the Europeans debate what to do, their currency, the euro, has also come under pressure, falling almost 10 percent since early December. The weakness in the euro has pushed some investors to buy US Treasury bills, long considered a safe haven.
“The euro zone has become a suspect place,” says Bob Brusca of Fact & Opinion Economics in New York. “I’m not saying it’s going to fall apart, but it’s become more suspect. And if the money flowing into the US is some new round of risk aversion, that might not be good, since we need the banks to take more risks, to make more loans.”
Some analysts believed that the US stock market may be having some difficulty digesting recent economic news that seems to show an uneven recovery. The pace of growth has been better for manufacturing than services, writes Nigel Gault, chief US economist for IHS/Global Insight in Lexington, Mass. In addition, the growth seems to be better for large businesses than small ones and seemed to be faster last year than this year.
“But it is recovery, nonetheless,” adds Mr. Gault.
With the Dow down more than 5 percent for the year so far, the optimistic psychology from last year is being tested.
Mr. Brown says part of the problem for the economy, perhaps reflected in stock market returns, is concerns among small business leaders about changes in Washington. “I talk to a lot of small business owners, and they are worried about what Washington will or won’t do,” he says. “So far there is no health care and cap and trade bill, but they are worried about it.”
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