Stocks tumble for second day; Treasurys surge
NEW YORK – Stocks plunged for a second straight day Thursday, falling to a ranges not seen in six years as financial and energy stocks tumbled and as demand for the safety of government debt spiked to historic levels.
Stocks, which had been weak for much of the session, lost ground after hopes faded that lawmakers would soon put together an aid package for the U.S. automakers and as major indexes like the Standard & Poor’s 500 index broke through lows established in 2002. That breach of key technical thresholds sent a shudder through the market and touched off further selling.
The pullback for the second straight day sent the Standard & Poor’s 500 index down 6.7 percent to the 752 level, below the closing low of 776.76 logged on Oct. 9, 2002. The Dow Jones industrial average, meanwhile, fell 445 points, or 5.6 percent. The decline brings the Dow’s two-day decline to 873 points.
Financial stocks plunged on worries that the government’s financial rescue won’t be sufficient to cover banks’ losses. Meanwhile, a sharp drop in oil prices weighed heavily on energy companies.
Thursday’s pullback came amid heavy volume, a welcome sign for some investors who are looking for the market to experience a cathartic sell-off that could lay the groundwork for a recovery. Heavier volume can signal investors are scared enough to sell rather than simply sitting on the sidelines, which can result in relatively light volume.
Observers said, however, that the selling was as much to do with entrenched pessimism about the prospects for many corners of the economy.
“Unrelenting gloom has taken over the markets,” said Dana Johnson, chief economist at Comerica Inc. “The economic news, the concerns about some major financial institutions, the concerns about the auto sector, earnings reports, everything is coming out in a way that is just provoking a massive selling in the stock market.”
“Back in October we were looking at a potential catastrophic meltdown of the credit markets, and that didn’t happen,” he said. “But that doesn’t mean tremendous damage hasn’t been done to the economy.”
According to preliminary calculations, the Dow fell 444.99, or 5.56 percent, to 7,552.29.
Broader stock indicators also showed huge declines. The Standard & Poor’s 500 index fell 54.14, or 6.71 percent, to 752.44. The Nasdaq composite index fell 70.30, or 5.07 percent, to 1,316.12.
The Russell 2000 index of smaller companies fell 27.07, or 6.56 percent, to 385.31.
Declining issues outnumbered advancers by about 10 to 1 on the New York Stock Exchange, where volume came to 2.23 billion shares.
Gus Scacco, managing director at AG Asset Management, said investors can’t manage to regain confidence as the market continues to plumb new depths. Stocks fell to their lowest level in more than five years on Wednesday.
“We’re trying to make a bottom but we keep breaking through,” he said.
Bond prices showed stunning advances as investors clamored for the safety of government debt. The yield on the benchmark 10-year Treasury note fell to 3.14 percent from 3.32 percent late Wednesday. Bond yields move opposite their price. The yield on the three-month Treasury bill, considered one of the safest assets around, fell to 0.03 percent from 0.06 percent late Wednesday.
Light, sweet crude for December delivery fell 7 percent, or $4, to settle at $49.62 on the New York Mercantile Exchange.