“Worries about the U.S. economy pushed stocks to the longest losing streak in nearly three years, sending the Standard & Poor’s 500-stock index to a 2011 closing low.
The Dow Jones Industrial Average tumbled 265.87 points, or 2.2%, to 11866.62, on Tuesday. The blue-chip index’s eighth consecutive decline marks its longest losing streak since October 2008. It has lost 6.7% during the skid, dating back to July 22. This is only the sixth time the Dow has dropped eight straight days in more than 30 years.
The S&P 500 shed 32.89 points, or 2.6%, to 1254.05, marking its seventh straight loss. The index suffered its biggest percentage drop in a year and registered the lowest close since December.
The technology-oriented Nasdaq Composite gave up 75.37 points, or 2.8%, to 2669.24, its biggest percentage drop since last August.
“The market is in corrective mode,” said Tom Donino, co-head of trading at First New York Securities.
Stocks slumped even as President Barack Obama signed into law a bill that raises the nation’s debt ceiling and cuts the budget deficit by at least $2.1 trillion over the next decade. Markets are now focused on weak growth plaguing the U.S. economy.
Data Tuesday showed Americans cut spending by the most in nearly two years and saved at a faster rate during June, a pair of signs that underscored the economy’s lack of vigor.
The consumer-spending figures highlight another aspect of the struggling recovery. Last week brought news that the U.S. economy barely expanded in the first half, and a report on Monday showed that manufacturing is shaky. Friday’s employment report is expected to continue to show a stagnant labor market.
“All the debt-ceiling drama did was mask what’s really happening in the economy,” said Rob Stein, global head of asset management at Astor Asset Management. “The ultimate outcome is slow growth for years and years.”" (Wall Street Journal)
I couldn’t agree more with Rob’s comment about the debt ceiling debate masking the shape our economy is in. The ISM Index was reported at 50.9 yesterday, a 4.4 point drop compared to last month. The ISM index monitors employment, production inventories, new orders and supplier deliveries. I expected the market react negatively to this yesterday, but what we saw was a see-saw swing because of the US House voting on the debt ceiling. The Dow closed down 10 points yesterday, a fallacy to say the least.
As stated in the WSJ report, personal spending is down -0.2% for the month of July. Since the market did not react accordingly to the weak manufacturing data yesterday, today’s significant drop was due to a joint reaction of weak manufacturing data and weak personal spending data… a delayed reaction of some sort.
Disclosure: I am short DIA