Stocks plunge; Dow drops below 11,000
NEW YORK » Stocks dropped yesterday, extending investors' losses for the third straight session and pushing the Dow Jones industrial average below 11,000 for the first time since March 9.
The Dow has lost more than 316 points this week; the selloff has also wiped out the Nasdaq composite index's gains for the year and put the Standard & Poor's 500 index less than 8 points away from its Dec. 31 close.
With little economic data or corporate news to move stocks, traders were left to decide whether the week's tumble was a buying opportunity or a harbinger of worse days ahead. Stocks spent most the day higher, but the advance-decline line was narrow and the market turned negative in late afternoon.
Volume was light, as it has been all week, which some investors say is a sign of more losses to come.
"When we have big down days on big volume, that's a sign of capitulation," said Chris Johnson, manager of quantitative analysis at Schaeffer's Investment Research in Cincinnati. "Monday and Tuesday, we saw selling, but it wasn't the type of volume we like to see for short term-buying opportunities. ... All the sellers aren't out of this market yet."
The Dow Jones industrial average fell 71.24, or 0.65 percent, to 10,930.90.
Broader stock indicators also fell. The Standard & Poor's 500 index fell 7.70, or 0.61 percent, to 1,256.15, and the Nasdaq composite index fell 10.98, or 0.51 percent, to 2,151.80.
Declining issues led advancers by roughly 9 to 7 on the New York Stock Exchange.
European markets closed higher after their Tuesday swoon, but Asian stocks continued to tremble. The Shanghai Composite Index dropped 5.36 percent, its biggest fall in more than four years, on fears that new share issues may outstrip demand. Japan's Nikkei stock average fell to its lowest close in six months on concerns over U.S. interest rates and the arrest this week of a high-profile fund manager.
Treasury bonds fell, with the yield on the 10-year Treasury note rising to 5.02 percent from 5.01 percent late Tuesday. The U.S. dollar was up against other major currencies.
Oil prices fell substantially, giving the market its early-session boost. A barrel of light crude settled at $70.82, down $1.68, on the New York Mercantile Exchange.
Equity investors, consumed with worry over the Federal Reserve's interest rate policy, have sent stocks on a roller-coaster ride over the last four weeks, driving them down from near record highs, then building them up again.
Nikkei plummets amid global jitters
TOKYO » Asian stocks fell to the lowest this year on speculation rising global interest rates will stifle demand for goods made by companies in the region.
Japan's benchmark Nikkei stock index plunged more than 3 percent in intraday trading today, falling to its lowest level in six months amid jitters about declines on global markets.
The Nikkei 225 index dropped 460.93 points, or 3.05 percent, to 14,635.08 points shortly after the start of afternoon trading, falling below 15,000 for the first time since December.
Investors were nervous about the third straight declining session yesterday on Wall Street amid concerns that possible U.S. interest rates hikes would slow growth in the U.S., and possibly elsewhere.
A U.S. central banker yesterday signaled rates will keep rising in the world's biggest economy, the fourth such official to do so this week.
In Hong Kong, the blue-chip Hang Seng Index declined nearly 250 points, set for its lowest close in almost three months, also on interest-rate concerns.
"The Hong Kong market is concerned about interest rates and a slowing U.S. economy," said Ben Kwong, head of research at KGI Asia Ltd. in Hong Kong. "It will continue to trend down until the Fed meeting" on June 29.
Meanwhile, South Korea's central bank unexpectedly raised borrowing costs today, a day after an increase in Thailand.
"The rate increase in Korea is negative for investor sentiment," said Park Hyung Ryul, who helps oversee about $1.3 billion at KTB Asset Management Co. in Seoul. "The possibility of further rate increases in the U.S., together with a slowing economy, is a worst-case scenario for Asian stock markets."
The Morgan Stanley Capital International Asia Pacific Index dropped 2.1 percent to 121.16 at midday in Tokyo, set for its lowest close since Dec. 20. The index has plummeted 7.1 percent in the past four days, putting it on course for the biggest weekly drop since the period ended July 26, 2002.
Hong Kong's so-called H share index for Chinese-listed companies that are available to overseas investors plunged 3.8 percent.
The slump this week has accounted for almost half of the MSCI index's 15 percent retreat from an all-time on May 8, as concern deepened that accelerating inflation will force central banks to boost rates even as global economic growth is slowing.
In the United States, stocks fell to four-month lows yesterday, with the Dow Jones Industrial Average sinking below 11,000. Jack Guynn, the president of the Federal Reserve Bank of Atlanta, said recent inflation figures are "bothersome" and that the Fed must "remain open to rethinking our policy."
His comments echoed those of other U.S. policy makers this week, including Chairman Ben S. Bernanke, that have fueled speculation of more rate increases to curb rising prices in the world's biggest economy. Bernanke said on June 5 that inflation is accelerating and "unwelcome."
The global sell-off has prompted some investors to limit their losses and shift assets into fixed-income securities such as Treasuries, which are backed by the U.S. government.
"A combination of slowing growth and rising interest rates in the U.S. is the worst news for stocks everywhere," said Jason Teh, who manages $4 billion at Investors Mutual in Sydney. "That scenario is looking more likely every day."
Bloomberg News and the Associated Press contributed to this report