Stocks on Two-Day Skid as Economic Data Disappoint
GEOFFREY ROGOW ROB CURRAN
Stocks declined for a second straight day after weak factory data pointed to an anemic economic recovery and one Wall Street bank suggested the three-month rally in stocks may be over.
After pushing into positive territory for 2009 at the close Friday, the Dow Jones Industrial Average has dropped this week. The benchmark fell 107.46 points, or 1.3%, to 8504.67, after sinking 187 points on Monday. The Dow is clinging to a 0.05% gain for the month to date, but is now down 3.1% for the year.
![[Markets Data]](http://s.wsj.net/public/resources/images/MDGpromo_D01222009151210.jpg)
Economically sensitive consumer, energy and materials stocks fared worst after a mixed bag of reports on housing, inflation and industrial output. Helping add to the selling pressure, Morgan Stanley strategist Jason Todd said that after the S&P 500 breached the 950 level last week, "the [stock] rally may now be over."
"As the market has rallied, the risk-reward has shifted. Equity markets now implicitly need a V-shaped recovery to sustain further gains. We do not expect such a recovery and therefore believe the next move is more likely to be down than up," Mr. Todd wrote in a note.
The S&P 500 sank 11.75 points, or 1.3%, to 911.97 as most of its sectors fell. Best Buy slid 7.3% after the electronics chain reported a first-quarter earnings drop. A slide in oil futures weighed on commodities-related companies. Crude-oil prices had been up more than $1 a barrel for much of the session, but settled down by 15 cents at $70.47 a barrel in New York.
The Nasdaq Composite Index sank 20.20 points, or 1.1%, to 1796.18.
Traders said the light-volume selloffs of the last couple of days reflect fading optimism. Anthony Conroy, head trader at BNY ConvergEx in New York, said traders have recently started betting on a jump in the Chicago Board Options Exchange's Volatility Index, a popular gauge of market anxiety.
"We're definitely seeing some of that worry coming back into the market," said Mr. Conroy.
The VIX rose 6.1%, ending at 32.68, after surging 10% on Monday. The index crested near 80 at the peak of the credit crisis last fall.
Nonetheless, the market outlook is brighter than it was early this year when credit markets were tighter and many major banks were fighting for survival. With two weeks left in the quarter, fund managers who missed some or all of the recent gains may yet buy on the dips.
"Clients don't like to see an underperforming manager in an up market that has a lot of cash," said David Klaskin, chief investment officer for Oak Ridge Investments in Chicago. "People are buying what has worked already, in this case technology."
Worry that foreign governments could rotate more of their foreign-exchange reserves out of dollars put pressure on the U.S. currency. Treasury prices gained on purchases by the Federal Reserve, with the yield on the benchmark 10-year note slipping to about 3.68%.
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