US stocks continue to plunge on recession warning
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Pastor Dale Morgan
Aug 18, 2011, 3:43:25 PM8/18/11
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US stocks continue to plunge on recession warning
* From correspondents in New York
* From: AFP
* August 19, 2011 4:39AM
US stock markets have plunged around four per cent after investment bank Morgan Stanley warned that the United States and Europe were teetering on the brink of a new recession.
The Dow Jones Industrial Average dropped 436.92 points (3.8 per cent) to 10,973.29 as of 1am AEST today.
The broader S&P 500 sank 48.13 points (4.0 per cent) to 1145.75, while the tech-heavy Nasdaq Composite fell 110.32 points (4.4 per cent) to 2401.16.
Morgan Stanley said its new forecasts showed the United States and the eurozone "hovering dangerously close to recession".
The bank cut its 2011 global growth outlook to 3.9 per cent from 4.2 per cent, and the 2012 forecast to 3.8 per cent from 4.5 per cent.
Adding to the market fears, the US Federal Reserve Bank of Philadelphia revealed that manufacturing in the mid-Atlantic states took a sharp hit in August.
The bank said manufacturing activity "dipped significantly", lowering its index to negative 30.7 in August from positive 3.2 in July.
RDQ Economics described the Philadelphia report as "shockingly weak" and noted that "you have to go back to the depths of the 2008/09 recession and financial crisis to see as weak a reading".
Separately, the Labor Department reported that new claims for unemployment benefits rose back above 400,000 last week, underscoring the continued weakness of the US labour market.
"Morgan Stanley becoming the latest firm to lower its economic outlook certainly adds fuel to the fire regarding global growth prospects," said David Campione, an analyst with Briefing.com.
"But this morning's sell-off is not coming from any new catalyst. Instead, it is a continuation of the negative sentiment that has plagued the market these last few weeks."
US bank stocks were battered, with Bank of America sliding 6.6 per cent and Citigroup plummeting 8.4 per cent.
All 30 of the Dow's blue-chip stocks were down. Some of the hardest-hit companies were tech giant Hewlett-Packard, down 6.5 per cent, and aluminum producer Alcoa, down 5.3 per cent.
Bond prices surged as investors fled to the traditional safe haven of US government debt.
The 10-year Treasury yield fell to 1.974 per cent, lower than the previous record set during the US "Great Recession", before recovering slightly to 2.007 per cent. The 30-year hit 3.337 per cent before rebounding to 3.371.
"We're still a safe haven for international flows with the turmoil that is still going on abroad," said Lindsey Piegza of investment bank FTN, referring to uncertainty about the eurozone.
Stock markets in London, Paris and Frankfurt were all down more than five per cent overnight, driven by steep losses in European banking stocks.
A huge sell-off over concerns that the United States and Europe might begin to contract again has wiped trillions of dollars in value off world stock markets in the past couple of weeks.
US stocks continue to plunge on recession warning
* From correspondents in New York
* From: AFP
* August 19, 2011 4:39AM
US stock markets have plunged around four per cent after investment bank Morgan Stanley warned that the United States and Europe were teetering on the brink of a new recession.
The Dow Jones Industrial Average dropped 436.92 points (3.8 per cent) to 10,973.29 as of 1am AEST today.
The broader S&P 500 sank 48.13 points (4.0 per cent) to 1145.75, while the tech-heavy Nasdaq Composite fell 110.32 points (4.4 per cent) to 2401.16.
Morgan Stanley said its new forecasts showed the United States and the eurozone "hovering dangerously close to recession".
The bank cut its 2011 global growth outlook to 3.9 per cent from 4.2 per cent, and the 2012 forecast to 3.8 per cent from 4.5 per cent.
Adding to the market fears, the US Federal Reserve Bank of Philadelphia revealed that manufacturing in the mid-Atlantic states took a sharp hit in August.
The bank said manufacturing activity "dipped significantly", lowering its index to negative 30.7 in August from positive 3.2 in July.
RDQ Economics described the Philadelphia report as "shockingly weak" and noted that "you have to go back to the depths of the 2008/09 recession and financial crisis to see as weak a reading".
Separately, the Labor Department reported that new claims for unemployment benefits rose back above 400,000 last week, underscoring the continued weakness of the US labour market.
"Morgan Stanley becoming the latest firm to lower its economic outlook certainly adds fuel to the fire regarding global growth prospects," said David Campione, an analyst with Briefing.com.
"But this morning's sell-off is not coming from any new catalyst. Instead, it is a continuation of the negative sentiment that has plagued the market these last few weeks."
US bank stocks were battered, with Bank of America sliding 6.6 per cent and Citigroup plummeting 8.4 per cent.
All 30 of the Dow's blue-chip stocks were down. Some of the hardest-hit companies were tech giant Hewlett-Packard, down 6.5 per cent, and aluminum producer Alcoa, down 5.3 per cent.
Bond prices surged as investors fled to the traditional safe haven of US government debt.
The 10-year Treasury yield fell to 1.974 per cent, lower than the previous record set during the US "Great Recession", before recovering slightly to 2.007 per cent. The 30-year hit 3.337 per cent before rebounding to 3.371.
"We're still a safe haven for international flows with the turmoil that is still going on abroad," said Lindsey Piegza of investment bank FTN, referring to uncertainty about the eurozone.
Stock markets in London, Paris and Frankfurt were all down more than five per cent overnight, driven by steep losses in European banking stocks.
A huge sell-off over concerns that the United States and Europe might begin to contract again has wiped trillions of dollars in value off world stock markets in the past couple of weeks.
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