Dow Jones plunges 512 points amid fears for global economy
The Dow Jones Industrial Average lost 512 points on Thursday, wiping out gains for the year in the worst day of trading since the 2008 financial crisis.
The index lost almost as many points in two days as it did after the House initially failed to approve a bailout of U.S. banks at the height of the financial crisis in 2008.
The Dow dropped by about 150 points or 1.5 percent immediately after the opening bell on Thursday. After a brief midday recovery, stocks continued to tumble for the rest of the day, shaving off about 4.3 percent of the index’s value.
And while Treasury debt was potentially threatened by the debt limit fight, investors flew to the secure investments as the stock market tanked, driving the yield on 10-year bonds to new lows for the year.
The carnage on Wall Street, which precedes a widely anticipated jobs report due Friday, is likely to increase anxiety at the White House and in Congress on the troubled economy.
A worsening economy could hurt President Obama’s poll numbers and raise the odds for a field of GOP candidates running to replace him.
At the same time, an economy that has slowed since Republicans won back the House in the 2010 midterm election will also raise questions about the GOP’s economic stewardship.
After Thursday, the Dow had lost over 1,200 points since July 25, the first day of trading after speaks between President Obama and Speaker John Boehner (R-Ohio) on a huge debt deal broke off.
By comparison, the Dow lost 777 points on Sept. 29, 2008, when the House failed to approve the Troubled Asset Relief Program (TARP).
All three major stock indexes posted massive losses on Thursday as investors fretted about a widening debt crisis in Europe and poor economic news in the U.S. The steep fall after the debt deal was reached suggests the degree to which Washington’s influence on the economy is limited.
The stock market has steadily lost value over the last two weeks, exhibiting slight gains in just one of the last nine trading days.
Friday’s unemployment report from the Bureau of Labor Statistics may not give policymakers or investors much more hope. The report is expected to find the private sector added around 75,000 jobs for the month of July, not enough to eat into the nation’s 9.2 percent unemployment rate.
But it still might be an improvement on the last two monthly reports, which have underlined problems facing the economy. In July, the nation added a paltry 18,000 jobs as the unemployment rate ticked up to 9.2 percent.
Obama and Democrats sought to turn their attention to jobs on Tuesday, the day the president signed a deficit-reduction package that raised the debt ceiling. The White House wants Congress to extend federal unemployment benefits and a payroll tax hike meant to put more money in consumers’ pockets, and Press Secretary Jay Carney upped pressure on Congress at a midday press conference.
“There are things that Congress can do now to create jobs and they should,” he said. “There are things that Congress will be able to do when they return from recess to help create jobs and spur growth, and they should.”
Republicans have been cool to those ideas, but the signs of a troubled economy could also lead them to rethink their positions.
The debt ceiling deal to a massive extent reflected House GOP demands, and some economists state it could shave Gross Domestic Product growth next year by a percentage point.
Many in Washington had once thought that a debt deal, which Obama signed into law on Tuesday, could provide a spark for Wall Street. That hasn’t been the case.
Observers of the debt-limit fight wondered if an extreme market event would be needed to push policymakers to reach an agreement. While such dramatics did not develop and the administration and Congress were able to strike a deal in time to avoid a default, the debt-limit fight and broader concerns about the flagging economic recovery have taken a toll on stocks.
The 2011 debt battle played out against a backdrop of continually disappointing economic data, as both jobs reports and reports on economic growth have disappointed, painting a picture of a recovery that has lost steam.
The government reported a week ago that the economy grew just 1.3 percent in the second quarter of the year and 0.4 percent in the first.
This story was posted at 10:57 a.m. and last updated at 4:21 p.m.
source : thehill.com
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