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Stocks Fall Worldwide, US Money Moves To Safe Havens

Wednesday, 05 Jun 2013 11:53 PM

Floor Traders Chaos

The U.S. stock market plunged to its lowest level in a month on Wednesday, following a bad day on stock markets around the world.

The trading day began in Asia, with Japan’s Nikkei 225 index falling almost 4 percent after a disappointing speech on the economy by Japanese Prime Minister Shinzo Abe. The Nikkei has fallen 20 percent from its high in mid-May after soaring since the beginning of the year, the rise fueled by aggressive stimulus measures by the Bank of Japan.

Later European stock markets fell in France, Germany and the U.K.

Finally, in the U.S. a series of weak economic reports, which included disappointing data on hiring at private companies, plunging mortgage applications and sluggish orders to U.S. factories sent stocks falling to their lowest level in a month. The Dow Jones Industrial Average fell 217 points and finished under 15,000 at 14,960, a drop of 1.4 percent. It was the biggest decline in seven weeks.

In addition, the S & P 500 index ended down 22.48 points, or 1.4 percent, at 1,608.90. But it’s still up 12.8 percent this year. The NASDAQ composite index fell 43.78 points, or 1.3 percent, to 3,401.48. The NASDAQ index also closed at its lowest level in a month.

Companies in the mining, banking, housing and chemical industries, whose prospects are most closely tied to economic growth, led the market lower. That’s a sign investors are becoming less confident in the U.S. economy. Intel fell the most in the Dow. All 30 members of the index dropped.

Stocks started lower and declined steadily throughout the day. After rising every month this year and climbing to record levels this spring, some investors said a significant pullback was overdue.

One of the indicators followed most closely by the media and a pillar of the stock market’s record-breaking rally this year, employment, took a hit when payroll provider ADP said early Wednesday that U.S. businesses added just 135,000 jobs in May, the second straight month of weak gains. The increases are much lower than those reported over the winter, which averaged more than 200,000 a month from November through February.

A measure of employment in the service sector fell to the lowest level since last July. That’s a troubling sign because service companies, a broad category that includes entertainment, transportation and health care, have been the main source of job gains in the past several months.

Mortgage applications saw a sharp 11.5 percent drop in last week. The rebound in housing has also been one of the key factors supporting the stock market’s rally this year, and was another disappointment for investors.

Housing stocks slumped in response. Beazer Homes fell 60 cents to $18.78, a decline of 3.1 percent; and D.R. Horton dropped 27 cents, or 1.2 percent, to $22.65.

The fall in applications came as mortgage rates rose the highest point since April 2012. The increase has been driven by higher yields in the bond market. For example, the yield on 10-year Treasury notes climbed as high as 2.2 percent last week, the highest in more than two years. However, much of this gain in Treasury yields disappeared on Wednesday as investors sought safe havens. The yield on the 10-year Treasury note fell to 2.09 percent from 2.15 percent late Tuesday.

Also influenced by the move out of stocks, on Wednesday the price of crude oil rose 43 cents, or 0.5 percent, to $93.74 a barrel. Gold edged up $1.30 to settle at $1,398.50 an ounce. The dollar fell against the euro and the Japanese yen.

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