Stocks slide on Wall Street, extending sell-off

Trader Peter Tuch­man reacts as he looks at the num­bers dur­ing the clos­ing bell on the floor of the New York Stock Exchange, Fri­day, Oct. 19, 2012. Poor cor­po­rate earn­ings reports pounded the stock mar­ket Fri­day in a sour end to an oth­er­wise strong week of trad­ing. The Dow Jones indus­trial aver­age fell more than 200 points for its worst day in four months. (AP Photo/Mary Altaffer)

STEVE ROTHWELL

AP Busi­ness Writer

NEW YORK — Stocks slid on Wall Street Thurs­day, a day after the Dow Jones indus­trial aver­age logged its biggest one-day drop of the year, as investors fret­ted about the poten­tial for grid­lock in Washington.

The Dow closed down 121.41 points to 12,811.32, bring­ing its two-day loss to 434 points. The Stan­dard and Poor’s 500 index fell 17.02 points to 1,377.51 and the Nas­daq com­pos­ite slipped 41.71 to 2,895.58.

The Dow plunged 313 points Wednes­day, its fifth worst one-day drop fol­low­ing a U.S. pres­i­den­tial elec­tion. The biggest, in 2008, came in the midst of the finan­cial cri­sis on the day after Pres­i­dent Barack Obama won his first term.

The two-day slump came in the wake of Obama’s re-election to a sec­ond term as investors turned their focus back to Europe’s prob­lems and the so-called fis­cal cliff, a pack­age of tax increases and gov­ern­ment spend­ing cuts in the U.S. that will occur unless Con­gress acts by Jan. 1. Investors see it as a seri­ous threat to the eco­nomic recovery.

“The think­ing before the elec­tion was that it would remove some of the uncer­tainty, but it seems to have done the oppo­site,” said Tyler Ver­non, chief invest­ment offi­cer at Bilt­more Cap­i­tal Advi­sors in Prince­ton, N.J.

Stocks are still up on the year, but well below the peak they reached in Sep­tem­ber. That was when the Fed­eral Reserve announced a third round of its bond-buying pro­gram, which is intended to hold down bor­row­ing costs and encour­age lending.

The S&P 500 is 6 per­cent below its high close of the year, 1,465, which it reached on Sept. 14. That was its high­est level in nearly five years. It’s still up 10 per­cent for the year.

Investors may be tempted to sell appre­ci­ated stock before a pos­si­ble increase in the cap­i­tal gains tax at the end of the year, Ver­non said. Tax cuts enacted by Pres­i­dent George W. Bush expire at the end of this year and the U.S. gov­ern­ment wants to cut a $1 tril­lion bud­get deficit.

“The mood of the mar­ket has cer­tainly switched,” said J.J. Kina­han, chief deriv­a­tives strate­gist at TD Amer­i­trade, as investors mon­i­tor devel­op­ments on the fis­cal cliff and wait for more clues about Obama’s agenda.

Investors were encour­aged by two reports on the U.S. econ­omy that came out before the mar­ket opened. The Dow climbed as much as 48 points in the morn­ing but started to sink after the first hour of trading.

The Dow fell steadily through­out the rest of the day, and more steeply in the last hour of trad­ing. The Dow gave up 73 points in the last 40 min­utes, account­ing for more than half the day’s loss.

The Labor Depart­ment reported that the num­ber of peo­ple seek­ing unem­ploy­ment ben­e­fits fell 8,000 last week to 355,000, a pos­si­ble sign that the job mar­ket is heal­ing. Offi­cials cau­tioned that the fig­ures were dis­torted by Super­storm Sandy.

A sep­a­rate report showed that the U.S. trade deficit nar­rowed to its low­est level in almost two years as exports rose to a record high.

There was also encour­ag­ing news from Europe, where lead­ers shocked mar­kets a day ear­lier with a dire fore­cast for eco­nomic growth next year.

Euro­pean Cen­tral Bank head Mario Draghi said finan­cial mar­ket con­fi­dence “has vis­i­bly improved” as the 17-country group that uses the euro strug­gles with its debt cri­sis. But he said the out­look for the econ­omy remains “weak.” Draghi spoke after the bank’s gov­ern­ing coun­cil left its key inter­est rate unchanged at 0.75 percent.

The Euro­pean Com­mis­sion, the exec­u­tive arm of the Euro­pean Union, on Wednes­day slashed its out­look for growth for this year and 2013. The report helped set off a sharp decline in stocks in the U.S and Europe.

Spain’s gov­ern­ment said that it had met its financ­ing needs for the year after rais­ing the equiv­a­lent of $6.07 bil­lion in a series of bond auc­tions on Thurs­day. Spain became the focal point of the Euro­pean debt cri­sis ear­lier this year amid con­cern that it would strug­gle to refi­nance its debt at afford­able rates.

Among stocks mak­ing big moves:

— Energy drink maker Mon­ster Bev­er­age sank 57 cents to $44.40 after the com­pany said its rev­enue growth slowed in the third quarter.

— Kayak Soft­ware surged in after-hours trad­ing, gain­ing $8.14 to $39.18, after the travel web­site agreed to be bought by Priceline.com for $40 a share.

— Burger chain Wendy’s rose 13 cents to $4.39 after the com­pany said that a key sales fig­ure rose. Rev­enue at restau­rants open at least 15 months rose 2.7 per­cent, the sixth straight quar­ter of growth.

— CBS rose 36 cents to $34.36 after the com­pany said that earn­ings rose 16 per­cent as falling ad rev­enue was off­set by higher fees from pay TV distributors.

Posted by AP News on Nov 8 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.