Dow plunges 513 points; 2011 gains are wiped out

Stocks are battered as worries about global growth are causing traders to dump stocks and seek safety. Gold briefly tops $1,680 but falls back. Treasury yields fall as the dollar rises.

By Charley Blaine Aug 4, 2011 12:03PM
Charley BlaineUpdated: 11:15 p.m. ET

Stocks plunged, with the Dow Jones industrials ($INDU) tumbling 512 points, their worst one-day loss since December 2008 and ninth worst point loss, as investors worried that the U.S. economy may be slipping back into a recession. The overall market carnage wiped out all of the 2011 gains for the major averages.

The market rout was prompted in part by concerns that the Federal Reserve won't try to boost the economy again and the prospects of little -- if any help -- on the way from Congress or the Obama Administration.  A huge concern was what Friday's big jobs report will say. In addition, there were deep fears about the health of the European financial system; stocks on the continent fell sharply. Stocks in Brazil were down nearly 6%.

With today's losses, the market is now in a correction, with the Dow, the Standard & Poor's 500 Index ($INX) and the Nasdaq Composite Index ($COMPX) all down more than 11% from the closing highs for 2011, reached on April 29. Nearly all of the declines for the indexes has come since July 21; the Dow's point loss in that time is about 1,340 points.

Gold (-GC) briefly surged above $1,680 an ounce for the first time and then sold off itself, and crude oil (-CL) dropped below $88 a barrel for the first time since mid-February. Brent crude dropped to $107.25 a barrel, down 5.3%. 

The Dow closed down 513 points, or 4.3%, to 11,384. The S&P 500 was off 60 points, or 4.8%, to 1,200, its lowest level since Nov. 30, 2010. The Nasdaq was off 137 points, or 5.1%, to 2,556, its lowest level since Dec. 1, 2010. The Nasdaq-100 Index ($NDX.X) was down 106 points, or 4.6%, to 2,207.

Article continues below.
With Thursday's drubbing, the Dow is down 6.3% for the week with the S&P 500 down 7.1% and the Nasdaq off 7.3%.

The Dow is looking at its worst weekly performance since the week of Oct. 6, 2008, when the blue chips fell 18.2%. The S&P 500 and Nasdaq are looking at their worst weeks since the week of Nov. 17, 2008 when the S&P 500 fell 8.4% and the Nasdaq dropped 7.9%.

While gold fell back, investors bid hotly for Treasurys. The 10-year Treasury yield fell to 2.458% from Wednesday's 2.599%.

Gold settled down $7.30 to $1,659 an ounce after reaching as high as $1,684.90. Silver was off $2.33 to $39.43 an ounce, a decline of 5.6%. Crude oil was down $5.30, or 5.8%, to $86.63 a barrel, its lowest level since Feb. 18 as the Egyptian revolution neared its climax. It had reached as low as $86.04.

Futures trading suggests a slightly lower open, but don't pay much attention to the trading yet. Everything will change when the jobs report comes out. Japanese stocks tumbled at their Friday open. The Nikkei 225 Index ($JP:N225) was off 3.6% to 9,316 in early trading.

What started the blowoff?
The supposed trigger was a weak report on initial jobless claims. They were down 1,000 to  400,000. A week ago's estimate of 398,000 was revised to 401,000.

The number raised the worries for Friday's nonfarm payrolls and unemployment report. The report, which will come out at 8:30 a.m. ET, is expected to show little change in the unemployment rate, which was 9.2% in June and maybe an 85,000 gain in nonfarm payrolls.

But there were other big issues, including a move by the Bank of Japan to push the yen lower against major currencies, especially the dollar.

In addition, European stocks plunged on worries that debt problems for Greece, Portugal, Italy and Ireland were worsening. The European Central Bank unexpectedly began large-scale intervention in the euro zone debt markets, the first time since March, buying bonds in an apparent attempt to prevent the region’s sovereign debt crisis from engulfing Italy.

There were rumors in London that hedge funds were being forced to sell assets such as gold in order to cover deepening losses on other investments, the Guardian reported. This led to gold's surprising decline from a high of $1,684.90 to $1,659. Gold had surged as a safe haven bet in the eurozone and US debt crisis.

The market tensions also set off a furious battle between investors wanting safety in Swiss francs and the Japanese yen and the central banks of those countries who don't want their economies priced way too high.

Energy prices -- New York close



Thur.

Wed.

Month chg.

YTD chg.
Crude oil (-CL)

$86.63

$91.93

-9.48%

-5.20%
(per barrel)











Heating oil (-HO)

$2.8939

$3.0189

-6.53%

13.77%
(per gallon)











Natural gas (-NG)

$3.9410

$4.0900

-4.92%

-10.53%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.7372

$2.9313

-10.49%

11.58%
(per gallon)











Brent crude 

$107.25

$113.23

-8.13%

13.19%
(per barrel)











Retail gasoline

$3.7030

$3.7010

-0.19%

20.54%
(per gallon; AAA)












Worst selloff in a year
Today's selloff was the worst for the major averages since Dec. 1, 2008. Very little was spared.

General Motors (GM) was down 4.3% to $25.99 after second-quarter results beat estimates. But the company warned that profits in the second half of 2011 may be lower than first-half profits. Ford Motor (F) fell 6.8% to $10.86.

Mighty Apple (AAPL) and Google (GOOG) were off 3.9% each to $377.37 and $577.52, respectively.

All of the 30 Dow stocks were lower. The best performer were McDonald's (MCD), down 1.5% to $84.28 and Kraft Foods (KFT), which finished off 1.5% to $33.78.

Kraft announced plans today to spin off its North American grocery business to shareholders, splitting the existing company in two. The grocery business would consist of the company’s U.S. beverages, cheese, convenient meals and grocer segments and non-snack items in Canada and Food Service.

Only three S&P 500 stocks were higher: Motorola Mobility (MMI), Vulcan Materials (VMC) and PG&E (PCG).

None of the Nasdaq-100 stocks was higher. The top performers were Sears Holdings (SHLD) and Costco Wholesale (COST) , off 0.7% to $66.87 and $76.51, respectively. 

Winners and losers
Dendreon (DNDN) plunged 67.4% to $11.69. The drugmaker withdrew its sales estimates for 2011 and announced job cuts because of lower-than-expected growth in the use of prostate-cancer treatment Provenge. The problem is that the drug costs are extraordinarily high.

DirecTV (DTV) fell 5.7% to $46.63. The largest satellite-TV provider reported first-quarter profit that beat analysts’ estimates after gaining subscribers in the U.S. and Latin America.

Sotheby’s (BID) was off 2% to $39.19. The auction house said second-quarter earnings excluding some items were $1.83 a share, exceeding the $1.57 average analyst estimate.

Transocean (RIG) fell 8.6% to $53.98. The world’s largest offshore driller posted an 11th straight quarterly profit decline. Daily rental rates for the company’s vessels dropped as much as 26% during the second quarter because of competition from rival operators and an influx of newer rigs onto global drilling markets.

Walter Energy (WLT) declined 29.5% to $77.89. The southern Appalachia producer of steelmaking coal reported second-quarter revenue of $766.7 million, missing the $931 million average estimate by analysts in a Bloomberg survey.

Web.com Group (WWWW) soared 19.8% to $10.37. The company that builds Web sites for small businesses said it is buying Network Solutions and expects the deal to add at least 20% to the consensus estimate of its 2012 earnings.

Zipcar (ZIP) rose 0.6% to $23.23. The car- share company boosted its sales forecast for the full year to at least $240 million. Analysts project revenue of $238 million, according to the average of a Bloomberg survey.

Zumiez (ZUMZ) fell 19.7% to $21.77. The Everett, Wash.-based retailer reported comparable sales for July that missed analysts’ estimates for first month since December.

Short hits from the markets -- New York close



Thur.

Wed.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.010%

0.010%

-88.89%

-91.67%
5-year Treasury note 

1.132%

1.239%

-17.55%

-43.85%
10-year Treasury note

2.458%

2.599%

-12.37%

-25.63%
30-year Treasury bond

3.722%

3.873%

-9.92%

-14.67%
Currencies











U.S. Dollar Index

75.36

74.199

1.79%

-4.95%
British pound

1.6263

1.6445

-1.04%

4.21%
(in U.S. $)











U.S. $ in pounds

£0.615

£0.608

1.05%

-4.04%
Euro in dollars

$1.41

$1.44

-2.05%

5.46%
(in U.S. $)











U.S. $ in euros

€ 0.709

€ 0.696

2.09%

-5.18%
U.S. $ in yen 

79.30

77.16

2.93%

-2.54%
U.S. $ in Chinese

6.46

6.43

0.02%

-2.34%
yuan











Canada dollar

$1.021

$1.041

-2.49%

1.77%
(in U.S. $)











U.S. dollar 

$0.980

$0.961

2.55%

-1.73%
(in Canadian $)











Commodities

 

 

 

 
Gold (-GC)

$1,659.00

$1,666.30

1.89%

16.72%
(per troy ounce)











Copper (-HG)

$4.236

$4.326

-5.45%

-4.76%
(per pound)











Silver (-SI)

$39.4310

$41.7580

-1.68%

27.46%
(per troy ounce)











Wheat (-ZW)

$6.8175

$7.1050

1.38%

-14.16%
(per bushel)











Corn (-ZC)

$6.9375

7.06

4.24%

11.45%
(per bushel)











Cotton 

$1.0501

1.0442

2.87%

-27.48%
(per pound)











Coffee

$2.3585

2.419

-1.54%

-1.93%
(per pound)











Crude oil (-CL)

$86.63

$91.93

-9.48%

-5.20%
(per barrel)










 

263Comments
Aug 4, 2011 12:47PM
avatar

There is nothing like fear to drive the masses.  Congress leaves town and the mess is still there, what a joke the rest of the world sees as the leadership of this country.  They need to get back to Washington and unF*** themselves and get to work on fixing the tax code(flat tax), bring the troops home, stop subsidies to corporations making record profits, fix the FAA debacle, impose term limits upon themselves, the so called entitlements of social security and medicare are not entitlements because I pay into it every payday, return what has been taken and leave it alone, it is not yours to do with as you please.   And most of all unsell your souls to the people who funded you into office and get back to serving the citizens of the United States.  

Aug 4, 2011 12:27PM
avatar
I suspect that the actual number of un-employed is around 12,000,000.  We keep posting monthly percentages but what needs to be told is the real number.
Aug 4, 2011 12:43PM
avatar
Why don't they reverse the free tariff and triple tax imports to U.S.A.Thats what they did to us..Bring jobs back to the U.S.A.And stop rebuilding all these other countries and start at home.
Aug 4, 2011 12:44PM
avatar
"Stocks were plunging today, wiping out all of 2011's gains for the major averages as investors continued to worry that the global economy was falling into another recession."

Another recession?  I wasn't aware that the first one had ended!
Aug 4, 2011 12:37PM
avatar
I am soooo unemployed, here I sit with an MBA and no job prospects.  This is the worst situation I have ever been in and in addition to my two degrees, I have 25 years experience.  And now the stock market is tumbling and my 401K is losing it's value in leaps and bounds.  I believe that 1 in 4 Americans (25%) are unemployed or underemployed in this country.  And the media and government does not wish to cause panic to declare this figure.
Aug 4, 2011 12:30PM
avatar
What happened to the stocks SURGING from yesterday?  The best way to jump start the world economy is get the price of oil back down to $40 a barrel so us poor people can live normal again.
avatar

"how much are you willing to pay for a pairs of levi's"

 

Bingo, you hit it right on the head, it isn't about Obama, congress, libtards, or teabaggers. It's about all of us wanting it all, but not wanting to pay the price, we want jobs here, but don't want to pay workers decent wages, because we want this years style jeans cheap , not asking 'ma to patch up our old pair( if she even could today). We want our medicare and our ss, but we don't want to pay more to keep it solvent, we want a cutting edge educational system and health care system, but don't want to pay for it, we want our garbage collected curbside once a week without paying for it,  our roads pothole free, cheaper gas pump prices then the rest of the world, we wanted 5,000 sq ft McMansions, with low property taxes, that could house 10 people, but only two occupy it.. Good jobs, with security and benefits, but don't believe in unions.

 

Once again, cut or spend,  one way or another,you pay in the end..

Aug 4, 2011 12:40PM
avatar
Lets not forget the underemployed....those who used to have a good paying job who are now working for minimum wage or just above minimum wage in order to have a job! They can push numbers down our throats all day long, but I know too many underemployed and unemployed individuals!
Aug 4, 2011 12:44PM
avatar
See what all the screwing around in DC is good for! All the pissing and moaning the last 2 month by the idiots in Washington have put the economy in a tailspin. Instead of passing meaningful legislation they had to play "It's my way or the highway" while the whole world watched! And then, they go on a month long break and lay off 70,000 FAA workers because the contract isn't renewed. Good work Congress! Looking forward to the 2012 election so we can vote most of these idiots out of office!
Aug 4, 2011 1:07PM
avatar
I blame the whole government for this crap! Its not just one side that caused this, its both sides for not working together years ago. They dont even care they get there nice long vacations now while we suffer what a bunch of bull! 
Aug 4, 2011 12:26PM
avatar

yep...I knew they would change the headline.  Too many people hitting the nail on the head with the last headline.  Politicians can't stand truth.  Needs

1) Jobs

2) Cut Spending

3) Stop Social Engineering - see item 1

Aug 4, 2011 1:05PM
avatar

Our government has spent most of this admin either giving money to its buddies, raising it's credit card limit so they could have more, or campaigning and fundraising for the next election. Anybody who says they don't have a clue is totally wrong. The only clue they have is how to make themselves richer and keep that gravy train job YOU put them in. SO! Next time you vote, if you vote Dem or Rep YOU are the one without a clue. VOTE INDEPENDANT!

Aug 4, 2011 12:51PM
avatar

The real hit hasn't come yet. 

 

The next batch of layoffs and house foreclosures haven't hit yet.  I wish I could pull my money out of my IRA but have to let it sit or take an even larger hit because of TAX. 

 

So, I sit here and watch it drop...drop...drop while the politicians still don't have a clue.  Here I sit with enough common sense to know what is important and watching the country go into the toilet.

Folks - Social Engineering doesn't work - People need jobs.

avatar

We were laying the foundation for our current situation way back in the 80's.  Through several administrations, we "encouraged" all sorts of debt for people who couldn't afford it.  Through liar home loans, low rate credit cards, house refinancings etc., people who were making low wages were able to spend like someone who was making twice as much.

Now, we are in a collective "hangover", with nowhere else to beg, borrow or steal money to live an unaffordable lifestyle. 

No matter how much money the government prints now and tries to force into the economy, the general population and the almost 20 million unemployed and underemployed are being forced to live within whatever they make each week.  Millions are going through the agony of foreclosures on houses they probably could not afford in the first place. Millions also realize that indeed they do have to repay the thousands of dollars on their credit cards. Millions also realize that the banks are doing their best to screw us into the ground with their fees and interest rates. 

It goes on and on, but it is the reality today.  And, unfortunately, the outlook is bleak in part because of teh total lack of leadership on every level of government.

Aug 4, 2011 1:34PM
avatar
Ever notice how this country sticks its nose in all the other countries business and dumps a load of money on top of them, i think its time to quit being the worlds police and take care of #1 cuz WHAT COUNTRY IS GOING TO HELP US WHEN WE NEED IT!
Aug 4, 2011 12:35PM
avatar
Another depression is on the way folks...don't get your party horns out yet...we're not out of the woods.....The house, The Senate, and Congress left the FAA hanging and it's a royal mess. This whole country is a mess... we will never be the same from this point on....I'm very pissed about a lot of things, and I don't understand politics but....I'm learning....this debt thing was too much mud slinging and there's more mud slinging to have yet....it's not over yet....the USA is fractured and even Obama can't fix it now.    2012? I'm not voting for Boehner, Reid, or Obama...in fact, I may not vote at all!! *GASP!* Not vote? You say? HOW UN AMERICAN!!!   Trust me, every president I have voted for screws us in the **** in the long run and America suffers for it....Angry
Aug 4, 2011 1:44PM
avatar
Double Recession - Where are all the new jobs.....nobody is hiring, unemployment is back up...when it end.  There is no American Dream anymore.....only the dream that you have a job, and I mean just a job, no benefits, nothing....you need two jobs just to get by....its a pity to see our people hurting....and does Washington care...I doubt it, they all have their nice cozy jobs, and perks and really don't care about the people who elected them into offce.  We The People now stands for nothing.
Aug 4, 2011 12:34PM
avatar
For the last year or more I have been wondering why the market has been going up. Especially as high has 12,500. THe power of the Press and Pres is pretty strong but I was amazed on how BS can make it so high. Our Economy has not recovered and with all the spending and debt we have done in the last 2 years , now I am wondering if we could see the 6-7,000's again.
Aug 4, 2011 1:39PM
avatar
The bottom line is that our government has let us donw and conitnues to let us down by not doing their job...which is to 1) uphold the Constitution and 2) represent their constituents.  They only do either of the two when it suites their interests.  They are terrible leaders!  That is what created the problems in the first place.  They couldn't cut their way out of a paper bag with a fist full of razor blades.  They do as little as possible but then act like they are such good leaders...and they use the media to do their bidding.
Aug 4, 2011 12:42PM
avatar
Population control now in order.  Too many people, not enough resources.  And both the Dems and Repubs have failed all of us.
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