In afternoon trading, the three main market indexes had fallen about 2 percent. The Standard Poor’s index of 500 stocks and the Dow Jones industrial average were each down about 2.3 percent, and the Nasdaq composite index was down 1.9 percent.
Stocks in the United States followed Europe, where the European Central Bank said Jürgen Stark, a German who sits on the executive board of the E.C.B. and is known as an opponent of the bank’s bond-buying program, will resign his post.
The DAX in Germany fell 4 percent. The FTSE 100 in Britain closed down 2.4 percent. The Euro Stoxx 50 index was down 4.2 percent and the CAC 40 index in France was down 3.6 percent.
Paul Ballew, a former Federal Reserve economist and now chief economist at Nationwide, said short-term interest rates in Greece were reflecting increased uncertainty in Europe as well as speculation over whether there would be adequate restructuring in that nation’s economy to address its problems.
There was also evidence of a flight to safety among investors, in which they shed stocks for bonds. Yields on Germany’s 10-year bonds declined, and the United States Treasury’s 10-year note yield fell to 1.93 percent, from 1.98 percent late Thursday, after touching a low of 1.89 percent. “Issue number two is the continued anxiety in the United States that the recovery continues to stall, and that we will not be getting growth as strong as we would need in terms of corporate profits,” said Mr. Ballew.
“Even yesterday’s speech raises questions of whether there will be support for fiscal policy,” he said about the president’s jobs address.
Mr. Obama’s plan focused on generating jobs and included a number of tax cuts and spending proposals, like an extension and expansion of the cut in payroll taxes and a tax holiday for small businesses for hiring new employees. The president was to send a detailed proposal to Congress in a week.
Mr. Ballew said that questions persisted about how much of the proposal would pass.
In addition, investors were considering whether fiscal or monetary policy could come to the rescue of the economy as they await the Federal Reserve policy meeting later this month. Stocks were sharply lower on Thursday after the chairman of the Federal Reserve, Ben S. Bernanke, gave no new signs that there would be fresh stimulus measures.
“If you are in the market right now, you’ve got uncertainty on top of uncertainty on top of uncertainty,” Mr. Ballew said. “You have got a pretty toxic mix.”
The stock declines on Friday set the markets on track to extend their year- and month-to-date declines. And Clark Yingst, the chief market analyst at Joseph Gunnar, said that the fall of the euro against the dollar on Friday, resulting in a six-month low, suggested that the broader market as measured by the S.P. 500 had not yet completed its recent correction.
He said a rally earlier in the week in stocks was partially in anticipation of Mr. Bernanke’s and Mr. Obama’s speeches, and their possible policy tools that could be in the making.
“The market just doesn’t believe that it is going to be passed by that Republican house,” Mr. Yingst said of Mr. Obama’s speech.
He noted that the United States bond’s 10-year price recently touched record highs, with the yield lower than where it was in the midst of the global financial meltdown, 2.055 percent in December 2008.
“It is an indication that bond investors clearly see a significant slowdown in the U.S. economy,” he said, “and bond investors think it is going to remain very slow, very sluggish.”
Jack Ewing contributed reporting from Frankfurt.
Article source: http://www.nytimes.com/2011/09/10/business/daily-stock-market-activity.html?partner=rss&emc=rss
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