Dow closes below 10000 for first time in three months
| New York
The Dow Jones Industrial Average has dropped below 10000 for the first time since early November.
The Dow鈥檚 drop on Monday of 104 points to close at 9908 was precipitated in part by overseas worries. Concerns over the ability of Greece, Portugal, and Spain to pay off their debts spread to worries about the holding of that debt by European banks. That has led to rising insurance premiums to insure the debt of those countries against default.
鈥淔or some investors, looking at that pattern brought back memories of Lehman Brothers,鈥� says Fred Dickson, chief market strategist at D.A. Davidson in Lake Oswego, Ore. 鈥淥f course, Greece can raise taxes. Lehman Brothers had no options.鈥�
While the Europeans debate what to do, their currency, the euro, has also come under pressure, falling almost 10 percent since early December. The weakness in the euro has pushed some investors to buy US Treasury bills, long considered a safe haven.
鈥淭丑别 euro zone has become a suspect place,鈥� says Bob Brusca of Fact & Opinion Economics in New York. 鈥淚鈥檓 not saying it鈥檚 going to fall apart, but it鈥檚 become more suspect. And if the money flowing into the US is some new round of risk aversion, that might not be good, since we need the banks to take more risks, to make more loans.鈥�
Some analysts believed that the US stock market may be having some difficulty digesting recent economic news that seems to show an uneven recovery. The pace of growth has been better for manufacturing than services, writes Nigel Gault, chief US economist for IHS/Global Insight in Lexington, Mass. In addition, the growth seems to be better for large businesses than small ones and seemed to be faster last year than this year.
鈥淏ut it is recovery, nonetheless,鈥� adds Mr. Gault.
With the Dow down more than 5 percent for the year so far, the optimistic psychology from last year is being tested.
鈥淪elling begets more selling,鈥� says Scott Brown, chief economist for Raymond James & Associates in St. Petersburg, Fla. 鈥淭丑别 psychology seems pretty bad.鈥�
Mr. Brown says part of the problem for the economy, perhaps reflected in stock market returns, is concerns among small business leaders about changes in Washington. 鈥淚 talk to a lot of small business owners, and they are worried about what Washington will or won鈥檛 do,鈥� he says. 鈥淪o far there is no health care and cap and trade bill, but they are worried about it.鈥�
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