Stocks plunge amid worries of weak economy
NEW YORK (KABC) -- Stocks plunged again Wednesday as investors turned their attention back to the weak economy and Europe's debt problems.The Dow Jones industrial average closed down 519 points a day after a 429-point gain. It has now lost more than 2,000 in less than three weeks. The S&P 500 finished the day down 4.4 percent and the Nasdaq composite index down 4.1 percent.
This time, the selling was intensified by worries about in Europe. American bank stocks took hits because investors fretted that debt problems overseas might reach the United States. France came under pressure amid concerns that it could follow the U.S. and become the next country to lose its top AAA rating.
Investors appeared to be concerned about remarks made by the Federal Reserve on Tuesday that the U.S. economy is growing slower than expected.
Wall Street and Main Street don't know if the U.S. is heading toward another recession or if it's recovering from the last one, and that anxiety is playing out on the stock market.
Liz Detanna, a senior vice president at Wedbush Securities, says their investment group doesn't think another recession is going to happen.
Detanna said it is a different backdrop than it was during the 2008 and 2009 recession, especially in 2008 when markets would swing 800 points or more.
Gold rose above $1,800 per ounce for the first time as more money poured into investments considered safe at a volatile time for the financial markets. Gold closed up about $41 at $1,784. It first passed $1,600 only in late May.
The 10-year Treasury note, which has also served as a haven, also rose sharply. Its yield fell to 2.20 percent from 2.26 percent late Tuesday. It had reached a record low of 2.03 percent on Tuesday. A bond's yield falls when its price rises.
Things have been up and down all week. On Monday, the Dow lost more than 600 points. Tuesday, when the Fed decided to extend low interest rates for another two years, the Dow first went south and then ended the day 429 points higher.
Detanna said although the U.S. rating was downgraded last week, in the long run, it's better for our economy.
"People are very fearful I think in the forefront of their minds of the political issues surrounding the downgrade, and the downgrade will itself, we hope, force the politicians to act sooner rather than later as far as dealing with solving the budget issues," she said.
The volatility in the marketplace continues to strike fear and uncertainty into consumers, who make up 70 percent of the U.S. economy.
"People are hoarding their money unlike any time in the past," said Morgan Stanley financial advisor Rebecca Rothstein. "I used to see my clients go out and buy a second car or third car, take an expensive vacation, and think nothing about it. Go to any expensive restaurant they wanted to. We don't see that to the same degree."
The Associated Press contributed to this report.
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