As evidence of a slowing global economy grows, investors are showing some caution just one week after U.S. stocks hit an all time high.
Stocks fell after lackluster earnings from Bank of America and an apparent drop in demand for Apple’s iPods and iPhones dragged financial and technology stocks lower. New signs of weakness in Europe, where car sales are plunging and unemployment is rising, also weighed on the market.
On Monday, stocks sank after China reported economic growth that was slower than economists had expected. Metals, energy and other commodities have been hit hard this week, dragging down the stocks of miners, drillers and companies that provide services to them. Gold fell the most in 30 years.
The Dow Jones Industrial average fell 138.19 points, or 0.9 percent, to 14,618.59 on Wednesday, wiping out most of the gain it made Tuesday. The Dow, which reached an all-time high of 14,865.14 last Thursday, is down 1.7 percent this week after slumping 265.86 points on Monday.
The Standard & Poor’s 500 index dropped 22.56 points, or 1.4 percent, to 1,552.01 and is 2.2 percent lower since the opening bell on Monday. The S&P is 2.5 percent below its all-time closing high of 1,593.37.
Three stocks fell for every one that rose on the New York Stock Exchange. Consolidated volume was high at 4.2 billion shares.
Energy companies and miners fell as commodity prices extended their declines.
The price of crude oil dropped for the fourth day in five, falling 2.3 percent to $86.68 per barrel, based on expectations that global demand will fall. Copper fell to an 18-month low of $3.19 a pound.
As stock prices sank, investors sought the safety of bonds.The yield on the 10-year Treasury note, which moves inversely to its price, fell to 1.70 percent from 1.73 percent. It went as low as 1.68 percent, matching its lowest level of the year.
Despite the big drops this week, the Dow is still 11.6 percent higher this year, the S&P 500 index 8.8 percent. And while falling energy prices may hurt energy stocks now, in the long run they should put more money into the pockets of consumers and drive spending.
Stocks surged during the first three months of the year on optimism that a recovery in the housing market would spur the economy. But the stock market has struggled this month. Reports of weak hiring and retail sales suggested the economy may be cooling off.
“You’ve had numerous economic data points that have been, not really disastrous, but not really as robust as people might like,” said Cam Albright, director of asset allocation at Wilmington Trust Investment Advisors. “When you have a market as extended as this, you almost need perfect information to make it continue to go up.”
Technology stocks fell sharply, led by Apple. The Nasdaq composite index fell 59.96 points, or 1.8 percent, to 3,204.67. Apple, which makes up 8 percent of the index, slumped 5.5 percent to $402.80, after a supplier hinted at a slowdown in iPhone and iPad production.
Corporate earnings for the first quarter suggest that growth has been slow and steady, rather than robust as investors had hoped, said Kevin Mahn, president of Hennion and Walsh Asset Management. Consumers and businesses are still reluctant to ratchet up spending.
“We’re moving ahead, but begrudgingly and very slowly,” said Mahn, “I don’t think that the plow horse is going to start stepping backwards, but it certainly doesn’t have the capacity to start speeding up, at least right now.”
Business, Pages 26 on 04/18/2013