Stocks Falter in Last Hour; Trader Anxiety Sets In
June 14, 2010Stocks faltered in the last hour of trading Monday after investors gave in to anxiety about Europe's economy.
The Dow Jones industrial average erased an early gain of 118 points to end down 20.
Stocks began the day higher following a report that industrial production in the 16 countries that use the euro grew more than expected in April. That boosted confidence that Europe could solve its debt problems and pushed the euro above $1.22 for the first time since June 4.
Investors have been concerned that government spending cuts aimed at slashing debt would hurt Europe and slow a global recovery. However, there have been few signs so far that the steep budget cuts needed to contain rising debt in countries like Greece, Spain and Portugal have slowed economies around the world.
Greece is still enough of a concern that bad news about the country's well-known problems was enough to help take down the market's advance. Traders at first shrugged off news that credit rating agency Moody's lowered its rating on Greece's debt to "junk" status. But in the final hour, many traders apparently decided the safest move was to take money out of the market. They were particularly uneasy after the Dow had risen 312 points in the prior two days.
The early advance came on light trading volume. That left the market vulnerable because many traders want to see more investors buying in as a sign of growing confidence.
Dan Wantrobski, director of technical research at Janney Montgomery Scott in Philadelphia, expects the markets to be choppy for some time. He warned that the back-and-forth trading could push skittish investors from the market and raise the chances that the market slides again this summer.
"The longer we wait here in this kind of purgatory, the more the likelihood we can break through," he said, referring to another drop in the markets. He wouldn't be surprised to see the Standard & Poor's 500 index fall to the 950-1,000 level this summer. That's a drop of 8 percent to 13 percent.
According to preliminary calculations, the Dow fell 20.18, or 0.2 percent, to 10,190.89. The Dow hasn't risen three straight days since April.
The S&P 500 index fell 1.97, or 0.2 percent, to 1,089.63, while the Nasdaq composite index rose 0.36, or less than 0.1 percent, to 2,243.96.
Winning stocks outpaced losers by 3 to 2 on the New York Stock Exchange. Volume came to 1.1 billion shares.
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