NEW YORK (CBSNewYork/AP) — Stocks plunged Thursday after more signs of economic weakness triggered a global sell-off. Europe’s debt problems also helped trigger the heavy losses and investors are worried about the possibility of a global recession.
“Germany is such a strong anchor in the European zone and when the headlines talk about Germany stalling, I think all the other countries are soon to follow,” floor trader Jonathan Corpina told CBS 2’s Alexis Christoforous.READ MORE: Hundreds Of Bodies Of COVID Victims Still Being Stored In Refrigerated Morgue In Brooklyn
The Dow Jones industrial average closed down 419 points, or 3.7 percent, to 10,991. The S&P 500 is down 53, or 4.5 percent, to 1,141. The Nasdaq composite is down 131, or 5.2 percent, to 2,380.
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“This is yet another stage of panic selling,” said Gene Peroni Jr., a portfolio manager with Advisors Asset Management with $7.3 billion in client assets. “Investors are reacting first and asking questions later.”
Last week was one of the wildest in Wall Street history. The Dow moved more than 400 points on four straight days for the first time. But stocks had been relatively stable this week because investors were calmed by strong earnings reports and a flurry of corporate acquisition deals.
The Dow had fallen 76 points Tuesday and risen four points Wednesday — the first time that the average rose or fell by less than 100 points on two straight days in nearly three weeks.
That ended Thursday. And with stocks down big, money flooded into U.S. Treasurys and gold, both considered safer investments.
“At some point there’s going to be that bubble there, but it just seems at this point, the uncertainty in our markets, the fear in our markets, the continued fragile markets that we have, investors continue to move to gold,” Corpina said.
The yield on the 10-year Treasury note briefly fell below 2 percent for the first time, before recovering to 2.09 percent. Low yields show that investors are willing to accept a lower return on their money in exchange for safety. Demand for government debt has stayed high, and yields low, even after Standard & Poor’s stripped the United States of its top credit rating.
The U.S. and European economies are “dangerously close to recession,” Morgan Stanley economists wrote in a report. “It won’t take much in the form of additional shocks to tip the balance.”READ MORE: 'A Modern Miracle': New Jersey Mom Celebrating Mother's Day After Successfully Donating Kidney To 7-Year-Old Son
Here at home, the government says more people filed for unemployment benefits last week than were expected. There are also signs that inflation is going up, with prices for food, gasoline and clothes on the rise in the last month.
Meanwhile, the same fears that are driving down the stock market are pushing up the price of gold.
Gold rose to a record of $1,829.70 per ounce before falling back to $1,821.80. That’s up from $1,400 at the start of the year and more than double the price several years ago. The price of gold has set one record after another, with some investors looking for stability and others simply looking to cash in.
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Investors often turn to gold as a safe haven during troubling economic times.
“Investors feel like it’s prudent to have 15 to 20 percent of their portfolio in gold,” explained David Beahm, vice president of economic research with precious metals dealer Blanchard & Company.
It’s a record in dollar terms but remains below the 1980’s peak when adjusted for inflation. Some analysts believe the price will hit $2,000 an ounce in the near term.
Mayor Michael Bloomberg says the gyrating stock market is sending a very clear message that people are worried about Europe’s enormous financial problems and the way Washington is dealing with the financial crisis.
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“The public is upset. You see it in the markets and the markets can destroy wealth or create wealth. But more importantly they are telling you about the confindence in the future and the indicator is very worrysome,” Bloomberg said.
The mayor says that he hopes Washington gets the message because he doesn’t see a good ending unless we do something.MORE NEWS: 16-Year-Old Vlad Mosyuk Killed In New City Car Crash
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