Bank, Energy Stocks Lead Selloff
PETER A. MCKAY GEOFFREY ROGOW
A selloff in the financial sector and a sharp drop in commodities prices helped pull the broader stock market lower by the most in two months.
The Dow Jones Industrial Average sank 200.72 points, or 2.4%, to 8339.01, the biggest point and percentage drop since April 20. The benchmark is now down 5% for the year. This month, it is down 1.9%.
All but three of its 30 components declined, with American Express, Bank of America, J.P. Morgan Chase and Alcoa among the biggest losers.
The S&P 500-stock index slid 28.19 points, or 3.1%, to 893.04, also its worst single-day performance since April 20, as its financial sector fell 5.8% and its energy and basic-materials sectors shed 5%. The broad mesure is now negative for the year to date, down 1.1%.
![[Markets Data]](http://s.wsj.net/public/resources/images/MDGpromo_D01222009151210.jpg)
The Nasdaq Composite Index sank 61.28 points, or 3.4%, to 1766.19. It is still up 12% for the year.
Bank stocks helped lead major indexes off their March lows due in part to a flood of buying from retail investors, but those stocks have faced resistance in recent sessions after the Obama administration released its financial regulatory revamp.
Energy and materials stocks, which have also soared since the market touched its bear-market low in early March, sank on Monday after the World Bank said that the global economy could contract at a 2.9% rate this year, worse than the 1.7% contraction the organization had forecast earlier.
The report stoked selling around the globe, with most major benchmarks in Europe falling more than 2%. In Canada, the S&P/TSX Composite Index sank more than 4% as metals and energy stocks sank.
The front-month crude-oil futures contract settled down $2.62 at $66.93 a barrel on the New York Mercantile Exchange. Copper hit a three-week low.
Crude and other commodities have been key vehicles for investors to bet on a recovery in the global economy. That dynamic worked in favor of commodities and the shares of raw-materials producers during the stock market's spring rally, but sentiment on Wall Street has recently turned gloomier.
"This market needed to pull back a little bit, considering that the demand just isn't there," said energy broker Jeff Grossman of BRG Brokerage in New York. "Until further notice, we're in an environment where you can sell into rallies."
Other sectors sensitive to hopes for a recovery also suffered, including industrial stocks. Big decliners among blue chips included General Electric, off 4.8%; and Caterpillar, off 3.8%.
While economic trends will likely hold the market ransom for the time being, Jim Dunigan, managing executive of investments for PNC Wealth Management, said trading early this week will partly revolve around expectations surrounding Wednesday's Federal Reserve statement on interest rates and any message about additional Treasury purchases the central bank may make.
Investors will also be on guard this week against the possibility of volatility following the Treasury's scheduled sale of $104 billion in paper to finance the government's stimulus and bailout programs.
Jack Ablin, chief investment officer at Harris Private Bank in Chicago, said those newfound economic jitters could have a silver lining. If enough investors pile into Treasurys as a safety play during the upcoming auctions, it could quell fears that the U.S. government won't have sufficient demand for its paper over the long haul to fund its ambitious bailout and stimulus plans.
"As long as we can get that paper out there at a reasonable yield, that would be a bullish thing for stocks," said Mr. Ablin.
Treasury prices gained. The two-year note rose 3/32 to yield 1.149%. The 10-year note climbed 19/32 to yield 3.701%.
No comments:
Post a Comment