Raft of bad news pummels Wall St.
US stocks tumbled, sending the Dow Jones industrial average to its worst June since the Great Depression, as record oil prices, credit market write-downs, and a slowing economy threatened to extend a yearlong profit slump.
Oil's surge past $140 a barrel was just one of the day's worrisome developments. Warnings about the key financial, automotive, and high-tech industries added up to an increasingly troubled economy.
The Dow closed at its low of the day, down 358.41, or 3.03 percent, to 11,453.42, its lowest finish since Sept. 11, 2006, while all the major indexes lost around 3 percent. The Dow has slumped 9.4 percent this month, its worst June since an 18 percent tumble in 1930 during the Great Depression. All 30 index companies have posted losses in the month.
Yesterday's sell-off was sparked by a raft of negative news, including stock downgrades of General Motors Corp., and financial firms, and yet another record close for oil prices. "Right now fear is trumping greed," said John Bitner, the chief economist at Eastern Investment Advisors, a unit of Eastern Bank of Boston.
Analysts said stock markets reflect the economy's precarious position - and the growing sense that there's not much more the Federal Reserve can do to help. With the housing slump continuing to weigh on the economy and soaring oil prices adding to inflation pressures, the Fed is boxed in, analysts said.
It can't cut rates to boost the economy without risking an inflationary surge. But it can't raise them to quell inflation without risking a deeper downturn.
"The Fed is powerless, and maybe the market is coming to that realization," said Richard Yamarone, the director of economic research at Argus Research Corp. in New York. "Things are going to have to play themselves out."
Nariman Behravesh, chief economist at Global Insight, a forecasting firm in Waltham, said the Fed will likely keep a close eye on oil markets, and whether soaring energy prices spur broader inflation.
But with the economy struggling, that's something policy makers want to put off for a while, analysts said. They're betting the weak economy will cut oil demand enough to moderate prices.
"It feels like a catch-22," said Oscar Gonzalez, senior economist at John Hancock Financial Services in Boston. "Their only hope is that there is going to be enough time for the slowdown to have an impact on oil prices."
Analysts' negative comments on GM drove shares of the largest US automaker to their lowest level in more than 30 years, while Citigroup Inc. fell sharply after an analyst placed a "sell" rating on the stock and warned investors to expect less from the brokerage sector in an uneasy economic climate. Disappointing outlooks from technology bellwethers Oracle Corp. and BlackBerry maker Research In Motion Ltd. further soured investors' moods.
The gloom was compounded by an unnerving forecast about oil prices that raised the specter of higher inflation and even more damage to the economy.
OPEC president Chakib Khelil was quoted as telling a French television station that oil could rise to between $150 and $170 per barrel this summer before pulling back later in the year. That and a falling dollar helped send light, sweet crude as high as $140.39 before settling at a record $139.64 on the New York Mercantile Exchange. Rising oil has saddled nearly all parts of the economy with higher costs.
The stream of downbeat assessments drove home to investors how much US companies stand to be hurt from the fallout of the prolonged housing slump, the nearly year-old credit crisis, and the soaring price of oil. The great fear on the Street has been that rising prices and worries about their finances will force consumers to further curb their spending, sending the economy into even more of a decline.
Broader stock indicators also fell sharply. The Standard & Poor's 500 index dropped 38.82 to 1,283.15, and the technology-laden Nasdaq Composite slid 79.89 to 2,321.37.
