Slide continues on Wall Street
Wall Street extended last week’s slide today as investors worried that the quarterly results companies begin releasing this week will signal the economy is in worse shape than feared.
Oil prices helped fuel the pessimism, tumbling 8% to a new low for the year as investors bet economic weakness would curb demand.
Wall Street normally welcomes falling oil as a boost for consumers who pay less to put fuel in their car, but steep drops can touch off deeper fears about the overall economy.
Wall Street is expecting fourth-quarter and full-year earnings will be particularly bleak, especially after several companies warned last week that they are being hit hard by the recession.
Aluminium producer Alcoa, which last week announced it would slash production, fell again today after an analyst lowered his rating on the stock.
Financial stocks also declined as investors looked to Citigroup and Morgan Stanley, which could announce a deal as soon as Wednesday to combine their brokerage operations.
The potential tie-up underscores the troubles some banks are still having with tattered balance sheets, and a prominent analyst said Citigroup might still need to raise cash.
“I think that the biggest concern right now is the economy and whether this thing is going to get worse or it’s going to get better,” said Bernie McGinn, chief executive of McGinn Investment Management.
The intensity of the fear that permeated the market and provoked the heavy selling of September, October and November has lessened, Mr McGinn said, but investors are still hesitant to flood back into the market.
Today’s decline came on light volume, indicating an absence of buyers, not a rush of sellers. Traders said many investors were sitting on the sidelines until they get a better read on companies quarterly numbers and, more important, their forecasts for the year.
“The level of anxiety and the level of fear has moderated some, but it sure as heck hasn’t turned into optimism,” Mr McGinn said.
According to preliminary calculations, the Dow Jones industrial average fell 125.21, or 1.46%, to 8,473.97.
Broader stock indicators also declined. The Standard & Poor’s 500 index fell 20.09, or 2.26%, to 870.26, and the Nasdaq composite index fell 32.80, or 2.09%, to 1,538.79.
The Russell 2000 index of smaller companies fell 12.50, or 2.60%, to 468.80.
Declining issues outpaced advancers by nearly 4 to 1 on the New York Stock Exchange, where volume came to 1.31 billion shares compared with 1.16 billion traded on Friday.
