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Stocks tumble as more bad economic news piles up
Wall StreetNYRD106 5190906
Traders work on the floor of the Nerw York Stock Exchange Thursday June 26, 2008. Stocks tumbled Thursday as Wall Street contended with a barrage of bad news: another surge in oil prices and warnings of trouble in the key financial, automotive and high-tech industries. - photo by Associated Press
    NEW YORK — Stocks tumbled Thursday as Wall Street contended with a barrage of bad news: another surge in oil prices and warnings of trouble in the key financial, automotive and high-tech industries. The major indexes showed losses of more than 2 percent, including the Dow Jones industrial average, which shed about 250 points and dropped to its lowest level in more than a year.
    The Dow fell as low as 11,549.90, well under its 2008 trading low of 11,634.82 and to its lowest level since September 2006. That sent some investors rushing for the safety of Treasury bonds — government debt is regarded as a haven when the stock market is in turmoil.
    The passel of worries that investors juggled Thursday added up to an increasingly troubled economy. Analysts’ negative comments on General Motors Corp. sent shares of the largest U.S. automaker to their lowest level in more than 30 years, while Citigroup Inc. fell sharply after an analyst placed a ‘‘sell’’ rating on the stock and warned investors to expect less from the brokerage sector in an uneasy economic climate. Disappointing outlooks from technology bellwethers Oracle Corp. and BlackBerry maker Research In Motion Ltd. further soured investors’ moods and made the tech sector one of the steepest decliners.
    The gloom was compounded by an unnerving forecast about oil prices that raised the specter of higher inflation and even more damage to the economy.
    OPEC President Chakib Khelil was quoted as telling a French television station that oil could rise to between $150 and $170 per barrel this summer before pulling back later in the year. That and a falling dollar helped send light, sweet crude up $3.57 to $138.12 a barrel on the New York Mercantile Exchange. Rising oil has saddled nearly all parts of the economy with higher costs, weighing on consumers who now have to reach much deeper into their wallets at the gas pump and therefore have less to spend elsewhere.
    Thursday’s confluence of bad news overshadowed the National Association of Realtors’ report that existing home sales edged up last month, only the second increase in the past 10 months. It also wiped out any positive impact from the Federal Reserve’s widely expected decision Wednesday to leave interest rates unchanged.
    The stream of downbeat assessments drove home to investors how much U.S. companies stand to be hurt from the fallout of the prolonged housing slump, the nearly year-old credit crisis and the soaring price of oil. The great fear on the Street has been that rising prices and worries about their finances will force consumers to further curb their spending, sending the economy into even more of a decline.
    The latest reading on the gross domestic product Thursday backed up that fear. The Commerce Department said the economy as measured by GDP rose at 1 percent annual rate in the first quarter, a slight improvement from the previous estimate of 0.9 percent, but still quite anemic. Moreover, the number does not reflect the impact of higher gas and oil prices that shot up further during the second quarter, which ends Monday.
    ‘‘This is unfortunately kind of a slack period. We’re waiting for second-quarter earnings. Until then, we have this very negative attitude among investors and everyone seems to be latching onto negative news and shrugging off the positive news,’’ said Jack Ablin, chief investment officer at Harris Private Bank in Chicago, pointing to the uptick in housing sales.
    In early afternoon trading, the Dow fell 241.82, or 2.05 percent, to 11,570.01.
    Broader stock indicators also fell sharply. The Standard & Poor’s 500 index dropped 28.08, or 2.12 percent, to 1,293.89, and the technology-laden Nasdaq composite index declined 61.79, or 2.57 percent, to 2,339.47.
    Bond prices rose sharply. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.05 percent from 4.10 percent late Wednesday.
    The dollar was mixed against other major currencies, while the price of gold — an inflation hedge — jumped.
    Alexander Paris, economist and market analyst for Chicago-based Barrington Research, said the market’s drop appeared technical in nature — that Goldman Sachs’ downgrades might have triggered the selling, but that it was aggravated by end-of-the-quarter window dressing, in which institutions’ trades are designed to put their portfolios in the best light.
    Meanwhile, he added, ‘‘second quarter estimates are still declining. There might be some nervousness about the earnings season coming up.’’
    In other economic news Thursday, the Labor Department reported initial jobless claims remained flat last week at 384,000; Wall Street had been looking for a slight decline.
    The Realtors, meanwhile, said existing home sales rose 2 percent in May, compared to analysts’ forecast of 2.2 percent increase. Few observers believed this was the start of an upward trend in home sales.
    Corporate news — and downcast statements about several important sectors — gave investors plenty to worry about.
    GM, one of the 30 stocks that comprise the Dow industrials, fell $1.41, or 11 percent, to $11.40. A Goldman Sachs analyst cut his rating on the stock to ‘‘sell’’ and lowered ratings on several auto suppliers.
    Citigroup fell 83 cents, or 4.4 percent, to $18.02 after Goldman Sachs downgraded it and Merrill Lynch & Co., which fell $1.96, or 5.6 percent, to $33.50.
    Remarks from Oracle and Research in Motion dented a notion that tech companies might be able to more easily weather a downturn in the economy.
    Oracle, a maker of business software, warned that the traditionally slow summer months could prove particularly difficult this year. Research In Motion also issued a forecast that disappointed investors.
    Oracle fell 72 cents, or 3.2 percent, to $21.83, while Research in Motion fell $18.21, or 12.8 percent, to $124.12.
    Declining issues outnumbered advancers by about 6 to 1 on the New York Stock Exchange, where volume came to 753 million shares.
    The Russell 2000 index of smaller companies fell 18.11, or 2.53 percent, to 698.19.
    Overseas, Japan’s Nikkei stock average slipped 0.05 percent. Britain’s FTSE 100 fell 2.61 percent, Germany’s DAX index fell 2.39 percent, and France’s CAC-40 lost 2.43 percent.


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