November 22, 2011, Marketwatch
Stocks sank Monday, pulling the Dow Jones industrial average into negative territory for 2011, as the lack of progress by American lawmakers in reaching a budget deficit agreement magnified worry that Europe’s debt crisis would spur a global downturn.
"The good news is being totally discounted, and the fear of the worst-case scenarios are being priced in," said Tim Courtney, chief investment officer of Burns Advisory Group.
"The markets are aligning themselves like we’re going to have a global recession. Not only are stocks going down but commodities and real estate, so it’s betting against the economy," said Courtney.
After falling as much as 342 points, the Dow Jones industrial average finished at 11,547.31, losing 248.85 points, or 2.1 percent, and leaving the index off 0.3 percent for the year.
All 30 of the Dow’s components lost value, led by Bank of America Corp., which declined 5 percent.
"It seems like it does not want to go down below roughly the 11,000 mark," Courtney said.
"There is only so low the market can go until you say this is assuming we’re not even going to have an economy, that people won’t be going to work, that they’ll just stay at home and tend to their gardens," he added.
Extending losses into a fourth consecutive session, the S&P 500 index fell 22.67 points, or 1.9 percent, to 1,192.98.
The Nasdaq composite index declined 49.36 points, or 1.9 percent, to 2,523.14.
"A lot of the data recently is looking better than expected – retail sales, industrial wwwuction, LEI [leading economic indicators] and [a new] home sales [report]. But investors are saying, That’s nice, but backwards-looking … we could be pushed back into recession by Europe,’ " said Sam Stovall, chief equity strategist at S&P Capital IQ.
"Monday is also traditionally a capitulation day," said Stovall, pointing out that Oct. 3, when the S&P 500 closed at its lowest level so far this year, was also a Monday.
And March 9, 2009, when the S&P hit the bottom of a months-long stretch of selling that came with the financial crisis, was a Monday as well.
The question for investors is whether the current slide is a retest of the Oct. 3 low, in which case it would "represent a very nice buying opportunity," or the start of a bigger drop, according to Stovall.
"It gets bleakest at the time it’s best to be buying," he observed.
"The fact that our economy has been able to plug along and post rather decent data during the global financial crisis should be viewed as a success. However, it is completely overshadowed by the dire and incompetent actions of the [Congressional debt] supercommittee," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
The National Association of Realtors reported sales of previously owned U.S. homes climbed 1.4 percent last month to a seasonally adjusted annual rate of 4.97 million.
Another report had rating agency Moody’s Investors Service warning that conditions pose a threat to France’s credit outlook.