Economy
CLOSING BELL: June 21: DJIA: 12,573.57 | DOWN 250.82 | -1.96%
OIL: $78.20, DOWN 3.25, -3.99%
GOLD: $1,565.50, DOWN 50.30, -3.11%
GASOLINE (US Avg): $3.472, -.015
Wall Street Posts Worst Drop in 3 Weeks
Angela Moon, Reuters – Stocks posted the worst day in three weeks on Thursday on mounting evidence that slowing manufacturing growth worldwide threatened corporate profits.
Shares of energy and materials companies led declines as commodity prices fell. U.S. crude futures slipped below $80 a barrel for the first time since October and the S&P energy sector index .GSPE lost 4 percent. Investors said weak overseas demand was responsible for the decline in those industries.
Stocks’ slide was accelerated by a bearish call from Goldman Sachs, which recommended clients build short positions in the broad S&P 500 index on expectations of more economic weakness.
“We are recommending a short position in the S&P 500 index with a target of 1,285,” (roughly 5 percent below current levels), Goldman Sachs said in a note.
The investment bank cited the Philly Fed’s mid-Atlantic factory index, which fell to minus 16.6 in June, an unexpected contraction in the region’s factory activity.
Semiconductor stocks weighed on the Nasdaq after chipmaker Micron Technology Inc (MU.O) posted a net loss for the fourth straight quarter. Micron lost 7.8 percent to $5.65 and the PHLX semiconductor index .SOX dropped 4.1 percent.
Stocks had enjoyed a two-week run that brought the S&P up more than 7 percent on hopes for additional stimulus from the Federal Reserve.
Business activity across the euro zone shrank for a fifth straight month in June and Chinese manufacturing contracted, while weaker overseas demand slowed growth by U.S. factories.
“While we’ve seen only two of many regional manufacturing surveys for June, there is a clear deterioration taking place, with only the degree being the broad issue,” said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.
The KBW Bank Index .BKX fell 2.3 percent amid expectations Moody’s Investors Service would announce downgrades in the banking industry.
The Dow Jones industrial average .DJI was down 251.35 points, or 1.96 percent, at 12,573.04. The Standard & Poor’s 500 Index .SPX was down 30.19 points, or 2.23 percent, at 1,325.50. The Nasdaq Composite Index .IXIC was down 71.36 points, or 2.44 percent, at 2,859.09.
The day’s decline was the worst since June 1 when the S&P 500 fell 2.5 percent.
