Investors fled Wall Street again, driven by worries about the stability of the nation’s big banks and General Motors Corp.
NEW YORK (AP) — Investors fled Wall Street again, driven by worries about the stability of the nation’s big banks and General Motors Corp.
Stocks ended at 12-year lows, more than wiping out a one-day rally Wednesday. Investors wrestled with more disheartening economic data, new concerns about GM and ongoing uncertainty about the financial system. Short selling ahead of the government’s Friday employment report exacerbated the losses, slashing 281 points from the Dow Jones industrials and sending all the major indexes down more than 4 percent.
Stocks fell in every industry, with the beleaguered banking sector posting some of the steepest losses. Citigroup Inc., still shaky despite receiving billions in government aid, at times sank below $1 and finished down 10 percent at $1.02. General Motors, meanwhile, ended with a loss of 15 percent at $1.86 as it warned of possible bankruptcy.
Analysts said investors are anxious ahead of the February Labor Department report that is likely to show the loss of hundreds of thousands of jobs. Even some positive news, including some better-than-expected retail sales and factory orders, was not enough to stoke investor confidence.
The reports failed to show a significant improvement and so the market gave back its big gain from Wednesday, said Doreen Mogavero, president of brokerage Mogavero, Lee & Co.
“The economic data is still obviously a huge worry,” she said. “I don’t think anyone thinks we’re in the clear because the market was up yesterday.”
Short sellers also dragged on the market, analysts said. Short sellers place bets that a stock will fall. Rising short positions on stocks can intensify that stock’s decline.
“There’s no question that we’re still suffering from very heavy pressure on short selling,” said Stephen A. Lieber, chief investment officer at Alpine Woods Capital Investors LLC in Purchase, N.Y.
“Just go out kill them. It’s the easiest way to go out and make a buck,” he said, referring to the pile-on effect short-sellers can have on the market.
According to preliminary calculations, the Dow fell 281.40, or 4.1 percent, to 6,594.44. The S&P 500 index dropped 32.95, or 4.6 percent, to 679.92. The Nasdaq composite index fell 52.30, or 3.9 percent, to 1,301.44.
The Russell 2000 index of smaller companies fell 21.49, or 5.8 percent, to 349.77.
On the New York Stock Exchange only 235 stocks advanced while 2,887 fell. Volume came to a heavy 1.89 billion shares.
Robert Pavlik, chief market strategist at Banyan Partners LLC in New York, said short selling is driving the market and that the seemingly endless selling is keeping away investors who would be attracted by beaten down stocks.
“Long-term investors would really step in if prices got too low or oversold and begin to do some bargain hunting. But with all the uncertainty that has been crated, long-term investors are not stepping in,” he said. “What incentive do long-term investors have stepping? Traders rule the roost.”
Stocks fell initially after China deflated investors’ hope that it would take new steps to stimulate its economy, but the discouraging economic data sent stocks even lower. The hope that China would unveil more government spending to help its economy was a major factor behind the market’s bounce Wednesday, which sent the Dow Jones industrials up nearly 150 points. The rally followed a five-day pummeling.
“It’s been this continuous (cycle of) hope leads to disappointment,” said Todd Salamone, senior vice president of research, Schaeffer’s Investment Research in Cincinnnati.