Wall Street Ends Rough 2nd Quarter on Sour Note
The stock market closed out a painful second quarter Wednesday and left investors with heavy losses and far more doubts about the economy than they had just months ago.
Stocks had their worst quarterly performance since the financial crisis. The Standard & Poor's 500 index, considered by many professional investors to be the best measure of the market's health, lost 11.9 percent, while the Dow Jones industrial average lost 10 percent.
"The bottom line is that investors, economists, analysts, everybody in the country wants to see a faster economic rebound - not just faster but stronger," said CBS News business and economics correspondent Rebecca Jarvis. "What we've seen in the last couple of weeks are weak housing numbers, weak jobs numbers, and as of yesterday a weak consumer confidence number."
Meanwhile, Treasury notes and bonds soared during the quarter, driving interest rates sharply lower, as investors turning away from stocks sought a place where their money would be safe. In the early days of the quarter, the Treasury's 10-year note, used as a benchmark for consumer loans including mortages, was close to 4 percent. By the quarter's end, it had fallen to 2.94 percent.
On the last day of the April-June period, the Dow lost 96 points, and all the big indexes were down about 1 percent.
Investors spent much of the quarter repeating the same questions they had a year earlier: Can the economy continue its recovery? Analysts say the answer most likely is yes but that traders are realizing it won't be easy.
After reaching its highest point since the financial crisis in April, the market began its plunging in May when investors grew fearful that Greece wouldn't make good on debt payments. Its economy represents only a tiny part of the European Union but traders worried that bad debt would trip up the world's financial system the way it did after the collapse of Lehman Brothers in September 2008. Those fears morphed into concerns about how much countries have been spending to revive growth.
Investors who still feel burned by the losses of the financial crisis also seized on mixed economic news as an indication that the rebound was sputtering. Now, investors are trying to determine how the recovery will play out.
Economist Joel Naroff of Naroff Economic Advisors says investors are disappointed the economy is not growing as strongly as they had anticipated earlier this year amid talk of a so-called V-shaped recovery, in which the economy rebounds sharply after its big drop. But he thinks investors have sold too much.
"They're thinking, 'Gee, if we're not getting a V-shaped recovery, we'll get a double dip.' They've gone from euphoria to depression," Naroff says. "The reality is somewhere in between."
Ted Aronson, a partner at Aronson-Johnson-Ortiz in Philadelphia, was a little baffled by traders' attitudes during the quarter.
"I don't know what's going. (The markets) are always interesting. But this is really wacky," he said.
The quarter's final day saw a last-hour selloff that has become standard operating procedure, especially when a big economic number, like the government's June employment report due out Friday, is imminent.
Karl Mills, chief Investment Officer at money manager Jurika, Mills & Kiefer, pointed to a lack of buyers in the market that forced sellers to keep lowering their prices to get someone to buy.
"No one wants to be a hero. Everyone is looking to employment numbers coming out Friday," he said.
According to preliminary calculations, the Dow fell 96.28, or 1 percent, to 9,774.02. The Standard & Poor's 500 index fell 10.53, or 1 percent, to 1,030.71, while the Nasdaq composite index fell 25.94, or 1.2 percent, to 2,109.24.
Falling stocks outnumbered those that rose on the New York Stock Exchange by about 2 to 1. Volume came to a light 1.4 billion shares.