Dow Loses 251, Its Second-Biggest Drop of the Year

Dow loses 251, its second-biggest drop of the yearNEW YORK (AP) - Investors yanked money out of stocks Thursday after new reports from the U.S. and China pointed to a sharp slowdown in manufacturing.

The Dow Jones industrial plunged 251 points, the second-biggest drop this year.

Losses in energy and materials companies led a widespread rout on the stock market. The Dow started sinking after 10 a.m., when the Philadelphia branch of the Federal Reserve reported a sharp contraction in manufacturing in the Northeast. The losses accelerated throughout the day.

"The news has been horrible out there," said Uri Landesman, president of Platinum Partners. "The U.S. economy is slowing down. And China's growth is definitely under question."

The bad news kept piling up as the day went on. Mining and other companies that made basic materials fell hard after prices for commodities such as copper and oil dropped. Goldman Sachs (GS) analysts advised their clients to bet that stocks would fall, and speculation swirled that Moody's would cut the credit ratings of 17 banks.

The Dow lost 250.82 points to close at 12,573.57, a drop of 2 percent. Alcoa (AA) lost 37 cents to $8.55. A new report that manufacturing slowed in China was troubling since that country's economy has helped drive global economic growth over the past four years. China is a major importer of copper and other basic materials.

The Standard & Poor's 500 index lost 30.18 points to 1,325.51, a decline of 2.2 percent. The Nasdaq composite fell 71.36 points, 2.4 percent, to 2,859.09. All three indexes lost their gains for the week.

The late-morning blows to investor confidence were just the latest reasons for people to pull money of out stocks. Earlier Thursday, the Labor Department reported that the four-week average of applications for unemployment benefits, a figure closely watched by economists, jumped to the highest level since September. The National Association of Realtors also reported that sales of previously occupied homes dropped 1.5 percent in May.

All this came a day after the Federal Reserve slashed its estimates for U.S. economic growth and said it would extend a bond-buying program through the end of the year, disappointing investors who had hoped for bolder steps from the central bank to get the economy going again.

"What's worse is that things are getting weaker without the Fed coming in," said Rex Macey, chief investment officer at Wilmington Trust Investment Advisors. "We had a run-up in the market this month because people had been expecting Fed action. Today, the market is giving it back."

A manufacturing survey for countries that use the European currency also showed a contraction. The reports out of China and Europe helped sink commodity prices. Copper and platinum fell 2 percent. Benchmark U.S. crude hit its lowest level in almost nine months, $78.20 a barrel. That's down almost 30 percent from a peak in February.

The Philadelphia Fed index pushed Treasury prices up and yields down as traders shifted money into the their favorite hiding spot. The yield on the 10-year note slipped to 1.61 percent, down from 1.63 percent late Wednesday.

Material and energy companies, whose fortunes are closely tied to economic swings, led all 10 industry groups within the S&P 500 index lower. Just 12 of the 500 companies in the index rose.

In Europe, auditors calculated that Spain's troubled banks need as much as €62 billion ($78.76 billion). A Bank of Spain official said this scenario was much less than the €100 billion that the 17 countries in the euro currency union said they would provide for Spain's banking sector.

Among stocks making big moves:

- ConAgra Foods (CAG), a major food maker whose brands include Hebrew National and Chef Boyardee, gained 2.7 percent. The company's adjusted earnings and sales topped Wall Street's expectations. The stock climbed 66 cents to $25.26.

- Bed Bath & Beyond (BBBY) plunged 17 percent, the most in the S&P 500. The retailer said it expects weaker earnings in the current quarter than analysts expected even though it reported better profits after the market closed Wednesday. Bed Bath & Beyond's stock lost $12.50 to $61.17.

- Red Hat (RHT) slumped 6.2 percent. The largest provider of the Linux open source operating system for computers reported weak figures for deferred revenue. Red Hat's stock dropped $3.50 to $53.00.


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16 Comments

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n5monthsocrapleft

america will go from a obamy "great recession" to his depression. ! thank god there's only 5 months of this muslim clowns crap left. !

June 22 2012 at 2:29 PM Report abuse +2 rate up rate down Reply
cpo1514

And Barry is busy in the International Gun Market, attending fund raisers and taking a speech class on "how to communicate in public". What we need is a President.

June 22 2012 at 8:31 AM Report abuse +2 rate up rate down Reply
nklswrth

As markets waver, in all likleyhood, due to miscalcualtions and fear mongeirng by Moody's and S&P, investment banks like Goldman-Sachs will overweight sell and loss advice-erroneoulsy attempting to convince thier investors to bet on the market downturn and losses, spurred only by natural periodic international productivity adjustments. What Moody's and S&P are attemptting to do is create weath for their investors by swaying the market with a false sense of insecurity. Those that ignore thier worthless fear mongering will find that the production shifts are nothing more than cyclical slow downs to ensure companies don't over-produce the current or popular models or products. The practice of periodically reviewing-and adjusting- production levels has been employed since 3000 BC. Don't let the unresearched and unquantifiable advice of idiots affect your investment strategy ! Hold your investement course steady. No need to listen to false prophets.

June 22 2012 at 4:42 AM Report abuse -1 rate up rate down Reply
maa2626

in closing, it is all due to the deficit, unemployment, europe, and bad US management (president)

June 21 2012 at 9:29 PM Report abuse +1 rate up rate down Reply
1 reply to maa2626's comment
Setanta

LET IT ALL CRASH AND BURN and then the reset button goes ON and we can start all over-
screw europe and any other nonCONSTITUTIONAL POLITICIANS.
ENOUGH.

July 09 2012 at 11:35 PM Report abuse rate up rate down Reply
maa2626

what will this do to the independant vote?

June 21 2012 at 9:28 PM Report abuse -1 rate up rate down Reply
maa2626

gosh, did the republicans do this?

June 21 2012 at 9:27 PM Report abuse -3 rate up rate down Reply
maa2626

can we blame it on goldman sachs?

June 21 2012 at 9:27 PM Report abuse -2 rate up rate down Reply
1 reply to maa2626's comment
Setanta

no--start with fwanks and dodd.

July 09 2012 at 11:36 PM Report abuse rate up rate down Reply
maa2626

can we blame it on "big oil"?

June 21 2012 at 9:27 PM Report abuse -2 rate up rate down Reply
maa2626

can we blame it on bankers?

June 21 2012 at 9:26 PM Report abuse -1 rate up rate down Reply
maa2626

how will it effect obamas re-election?

June 21 2012 at 9:25 PM Report abuse -1 rate up rate down Reply