US stocks sink as confidence drops
US stocks fell for a fourth session yesterday, as the lack of progress in dealing with heavy debt both in the United States and Europe further sapped investor confidence in equities.
Risky assets like commodities also fell, sparking a sell off in shares of industrials and energy companies.
Volume was lower than average, with investors more inclined to sit on the sidelines amid the uncertainty.
“We’re seeing signs of worsening in Europe, worsening in our market here. There is no viable resolution to this,” said Stephen Massocca, managing director of Wedbush Morgan in San Francisco.
The Dow Jones industrial average was down 248.85 points, or 2.11 per cent, at 11,547.31. The Standard & Poor’s 500 Index was down 22.66 points, or 1.86 per cent, at 1,192.99. The Nasdaq Composite Index was down 49.36 points, or 1.92 per cent, at 2,523.14.
A special US congressional committee was expected to concede failure to reach a deal after three months of talks to slash the deficit. There are concerns the stalemate will make it more difficult to pass extensions of stimulative measures like payroll tax cuts, which could hurt the US economy. In addition, investors are worried that the committee’s inability to come to an agreement could result in another downgrade of the US credit rating, though so far the major ratings agencies have not commented.
Moody’s Investors Service said a recent rise in interest rates on French government debt and weaker economic growth prospects could be negative for France’s credit rating.
Blue chips, which have been outperforming smaller cap stocks, fell the most. The Dow was off 0.3 per cent for the year. The S&P and the Nasdaq have fallen about 5 per cent.
The S&P quickly fell through the 1,200 level seen as the next level of support. After that support was seen at 1,187, representing the 61.8 per cent retracement of the 2011 high to low slide.
Among blue-chip stocks, Bank of America fell five per cent to $5.49. On the Nasdaq, Amazon.com shares lost four per cent to $189.25. After the closing bell, Hewlett-Packard’s reported quarterly results that beat Wall Street’s expectations. LinkedIn’s shares dropped to the lowest level in five months after its so-called lockup period ended, letting some early investors and employees sell the stock for the first time since the initial public offering. Stocks fell 2.8 per cent to $70 in New York trading.