Dow falls 97 points, worst showing this year

CHRISTINA REXRODE

AP Busi­ness Writer

NEW YORK — Stocks slumped Wednes­day in one of their worst show­ings this year as Greece, slog­ging through nego­ti­a­tions with other coun­tries over a bailout, once again cast a long shadow over the finan­cial markets.

The Dow Jones indus­trial aver­age dropped 97.33 points to close at 12,780.95. It was the worst one-day decline for the Dow this year, and the index nar­rowly avoided its first triple-digit loss for the year. The aver­age was down as much as 125 points.

The Stan­dard & Poor’s 500 and the Nas­daq com­pos­ite index climbed ten­ta­tively through the morn­ing but gave up their gains by after­noon. The S&P fell 7.27 points to 1,343.23. The Nas­daq fell 16 points to 2,915.83.

The declines were broad, with nine of the 10 indus­try groups in the S&P record­ing losses. The only group that didn’t was mate­ri­als, which was flat. Only five of the 30 stocks in the Dow rose for the day, and just barely.

In a 3½-hour con­fer­ence call with the finance min­is­ters of the other 16 coun­tries that use the euro, Greece offered assur­ances that it had found €325 mil­lion in bud­get cuts in addi­tion to harsh mea­sures that it has already promised.

But in a sign of the dis­trust that has built dur­ing the Euro­pean debt cri­sis, par­tic­u­larly among richer coun­tries, a Euro­pean offi­cial said Greece would need tighter over­sight of its bud­get before it receives another bailout.

Greece needs the money before a big bond pay­ment comes due March 20. A default would rat­tle the world finan­cial sys­tem. For weeks, incre­men­tal move­ment in the Greek cri­sis has whip­sawed U.S. stocks.

“Long story short, we long for the days when mar­kets traded on fun­da­men­tals,” said David Katz, prin­ci­pal at Weis­er­Mazars Wealth Advi­sors. He thinks stock picks have been ruled by emo­tion, rather than clear-eyed exam­i­na­tions of com­pa­nies’ bal­ance sheets, at least since the credit crunch in 2007 and the ensu­ing Great Recession.

“Just as quickly as you see the mar­ket pop up from one head­line, then you see the down­turn from another,” Katz said. “It doesn’t really have to be (big news). It’s not even the meat of the story, it’s the headline.”

Greece makes up just 2 per­cent of the total eco­nomic out­put of the 17 coun­tries that use the euro. But investors are trou­bled by the fall­out from a poten­tial default and sim­i­lar finan­cial prob­lems fes­ter­ing in other Euro­pean coun­tries, like Por­tu­gal, Italy and Spain.

“There is no short­age of peo­ple who would argue that Greece is a non-event,” said Dan McMa­hon, direc­tor of equity trad­ing at Ray­mond James. “It’s more that it’s a barom­e­ter for the rest of the eurozone.”

Stocks have risen steadily all year, so some ana­lysts argued that a slow­down was inevitable. The S&P 500 ended 2011 at 1,258, and many ana­lysts pre­dicted it would end 2012 at 1,350. But it had already reached that level last week.

“When the mar­ket does in a few weeks what was expected for the year, it’s nat­ural for the mar­ket to sort of pause and pinch itself and say, ‘Is this sup­posed to go on?’” said Brian Gen­dreau, mar­ket strate­gist for Cetera Finan­cial Group.

“If it con­tin­ued at the same pace for the rest of the year, that’s just unre­al­is­tic. You’d need an unre­lent­ing drum­beat of good news, and we haven’t got­ten that,” Gen­dreau said.

The price of oil climbed to its high­est level in five weeks after Iran said it would cut off some exports of crude to Europe. Iran was respond­ing to the Euro­pean Union’s plans to embargo Iran­ian oil this sum­mer, an attempt to pres­sure Iran to aban­don its nuclear pro­gram. Bench­mark U.S. crude rose $1.06 to end the day at $101.80 per bar­rel in New York.

The aver­age retail price for a gal­lon of gas was $3.52. Gas prices are already the high­est on record for this time of year, and econ­o­mists fear that they could crimp the halt­ing eco­nomic recov­ery. This time a year ago, gas was $3.12.

Apple stock went on a wild zigzag. It set an all-time high at mid­day, $526.29 per share, but fell sharply and closed down $11.79 at $497.67 after eight straight days of gains.

The decline appeared to be caused by rumors that the Nas­daq 100 index would adjust its com­po­nents to give Apple, the biggest com­pany in the world by mar­ket value, less weight. That would force mutual funds that track the Nas­daq 100 to sell Apple stock.

Those rumors may have been overblown. Nas­daq declined to com­ment on Apple but pointed out that it adjusts the index if a company’s mar­ket value rep­re­sents more than 24 per­cent of the index. Apple rep­re­sented about 17 per­cent at the end of the day Wednesday.

The euro fell slightly against the dol­lar to just under $1.31. The euro had been mostly ris­ing since mid-January, but topped out around $1.33 late last week.

The yield on the U.S. government’s bench­mark 10-year Trea­sury note fell to 1.93 per­cent from 1.94 per­cent. Yields fall and bond prices rise when investors decided to seek a haven for their money rather than take a bet on the stock market.

Among the biggest movers in the U.S. market:

— Com­cast, the cable provider, climbed 5 per­cent after beat­ing Wall Street expec­ta­tions for profit and rev­enue. It man­aged to slow the loss of cus­tomers as it added chan­nels and bet­ter cus­tomer service.

— Kel­logg rose 5 per­cent after announc­ing it would buy Pringles from Proc­ter & Gam­ble. Dia­mond Foods had a deal to buy Pringles but got caught up in an account­ing scan­dal. P&G was flat, and Dia­mond was up 5 percent.

— Zynga, the maker of pop­u­lar Face­book games like Far­mVille, plum­meted 18 per­cent after report­ing it lost money in the fourth quar­ter. Zynga went pub­lic in December.

Posted by AP News on Feb 15 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.