I have been warning for weeks that the stock market was losing steam and that the Fed induced bear market rally was on it’s last legs. Since January 19th the Dow is down 7.6% and looks like it wants to go much lower. There is much going on to concern investors, not the least, fears of sovereign debt default potential in southern Europe. Greece, Portugal and Spain are seeing credit insurance on their debt skyrocketing as fears they are over leveraged and in danger of defaulting. These countries are members of the European Union and can’t print money like the good ole US of A. They have to make huge spending cuts and their citizens don’t like it one bit. Look for social disorder in the days ahead, especially in Greece. We are heading into oversold territory in the U.S. stock market so a bit of a bounce would not surprise me but the main direction will be down.-Lou
Dow closes below 10,000 for first time in 3 months
NEW YORK (AP) — The Dow Jones industrial average closed below 10,000 for the first time in three months Monday on nagging concerns about debt loads in Europe.
Shares of big banks pulled the market lower, extending a slump that has led to four straight weekly losses.
Mounting deficits in weaker European economies including Greece, Portugal and Spain have raised questions about the health of the global financial system.
Greece’s finance minister said Monday the government is preparing to boost some taxes to shore up its finances. But civil servants opposed to cutbacks have pledged to strike on Wednesday.
The questions about finances in Europe are only the latest blow to investor confidence. The market began to stumble in mid-January after China announced plans to contain economic growth and as the Obama administration proposed rules to restrict trading by large financial institutions.
That interrupted a 10-month climb in stocks, which hit 12-year lows last March. The Dow is down 817 points, or 7.6 percent, since closing at a 15-month high of 10,725.43 on Jan. 19.
Brett Hryb, a portfolio manager withMFC Global Investment Management in Toronto, said the latest concern is that the financial troubles in a country like Greece, whose economy is small compared with the rest of Europe, will spill into other countries.
“Clearly Greece itself is nothing. It’s just a blip. It’s what the contagion could be,” he said.
According to preliminary calculations, the Dow fell 103.84, or 1 percent, to 9,908.39. On Thursday, the Dow traded below the psychological barrier of 10,000 for the first time since November. It hadn’t closed below that mark since Nov. 4.
The broader Standard & Poor’s 500 index fell 9.45, or 0.9 percent, to 1,056.74, while the Nasdaq composite index fell 15.07, or 0.7 percent, to 2,126.05.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.58 percent from 3.57 percent late Friday.
The dollar fell against other major currencies, while gold rose.
Crude oil rose 70 cents to settle at $71.89 per barrel on the New York Mercantile Exchange.
Jerry Webman, chief economist at OppenheimerFundsInc., said he doesn’t expect that problems with rising debt loads in Europe will cascade into other parts of the world’s economy, but he remains cautious.
“Right now, when anybody says the word ‘contained’ I start to tremble,” he said, referring to his skepticism about those who downplay worries about Greece.
Webman is also concerned by the shrugs that have greeted corporate earnings reports. Three out of four of the companies in the S&P 500 index that have reported results for the fourth quarter have posted stronger sales and profit numbers than analysts forecast, according to Thomson Reuters.
“The market is obviously not that enthusiastic about these good bottom-line and good top-line numbers,” Webman said, adding that he sees that as a reason to be concerned about the direction of stocks.
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