European debt leads Dow Jones to third 500-point drop in past week
BY DAVID ROEDER Business Reporterfirstname.lastname@example.org August 10, 2011 6:54AM
A custodian sweeps the floor of the New York Stock Exchange after the closing bell Wednesday. Wall Street focused Wednesday on the bleak landscape ahead for the economy and sold off, wiping out the big gains from a day earlier and then some. | AP
Updated: October 3, 2011 11:58AM
If the stock market moves lately didn’t seem so punishing, they’d be monotonous.
The Dow Jones industrial average lost 519.83 points Wednesday. It has declined more than 500 points three times in the last five sessions, and Wednesday’s retreat cost the index more than what it gained in Tuesday’s euphoria based on Federal Reserve policy.
Wall Street is a jackrabbit ready to take off in any direction. Wednesday’s selling intensified in the final hour of business, with some professionals attributing that to traders dumping shares to make margin calls.
The concern du jour was European debt. New evidence surfaced of financial instability in France and the situation was so serious that President Nicolas Sarkozy, known for his love of the good life, cut short a vacation on the French Riviera to summon his economic ministers.
It was a classic market in flight to safety. Gold rose higher than $1,800 an ounce for the first time, closing at $1,784.30, the dollar rose against most currencies and prices for the 10-year Treasury note rose despite lacking a AAA credit rating.
“The European debt crisis fell into the background while we were having our own debt crisis, but it never got solved,” said Paul Larson, chief equity strategist at Morningstar Inc.
Larson said traders are behaving out of an abundance of uncertainty and that he expects big daily moves to continue for a while. “Volatility breeds volatility,” he said.
Stocks of banks were hit especially hard in an extension of concerns about Europe. Jamie Dimon, chairman of JPMorgan Chase & Co. told CNBC that the economy is strong despite what the market thinks.
“The strength of the system is going to blow your socks off when it comes out of this malaise,” Dimon said, speaking on a day when shares in his company were falling 5.6 percent to $34.37.
Bank of America Corp. fell 11 percent to $6.77.
The Dow finished down 4.6 percent to 10,719.94. The Standard & Poor’s 500 index lost 51.77, 4.4 percent, to 1,120.76 and the Nasdaq composite index fell 101.47, 4.1 percent, to 2,381.05.
Tuesday, the Dow swung more than 600, ending with a gain 429, after the Fed promised to keep its bellwether interest rate near zero for at least two more years.
In a break from a recent pattern that has seen stocks and oil move in the same direction, the benchmark contract for September crude gained $3.59 to finish at $82.89 per barrel on the New York Mercantile Exchange.