March 5, 2021

Stocks and Bonds: Shares Decline Sharply Amid Uncertainty

Analysts attributed the declines, which pushed down indexes more than 5 percent for the month to date, at least partly to reactions related to the resignation of a top financial official at the European Central Bank, a development that put a spotlight on the internal discord over the response to the debt crisis. Jürgen Stark, a German who is leaving his position on the executive board of the E.C.B., is known as an opponent of the bank’s bond-buying program.

In addition, a Bloomberg News report said Germany was preparing banks in the event that Greece failed to meet the terms of its aid package and defaulted.

“These are particularly negative headlines, and the market took them as such,” said Dan Greenhaus, the chief global strategist at BTIG. “Market participants are increasingly nervous about a Greek default and its effect on the already weak European bank sector.”

He added that the resignation news “exacerbated” concerns about the euro currency zone.

Greece’s finance minister, Evangelos Venizelos, dismissed the talk of a default and said it was committed to fully executing the terms of the aid package, Bloomberg News also reported.

But concern over the euro zone debt crisis, along with uncertainty related to global economic growth, has been a touchy factor affecting the markets for months.

The DAX in Germany fell 4 percent. The FTSE 100 in Britain closed down 2.4 percent, and the CAC 40 index in France was down 3.6 percent.

Stocks in the United States followed markets in Europe. The Standard Poor’s index of 500 stocks closed down 31.67 points, or 2.7 percent, at 1,154.23. The Dow Jones industrial average fell 303.68 points, or 2.7 percent, to 10,992.13, and the Nasdaq composite index was down 61.15 points, or 2.4 percent, to 2,467.99.

The S. P. and the Dow were each down more than 4 percent in the week, and the Nasdaq was just over 3 percent lower.

A speech on jobs by President Obama did little to lift the malaise because of uncertainty over whether the program would pass and help the recovery, analysts said.

Paul Ballew, a former Federal Reserve economist and now chief economist at Nationwide, said short-term interest rates in Greece reflected uncertainty in Europe as well as speculation over whether there would be adequate restructuring in that nation’s economy to address its problems.

Yields on Germany’s 10-year bonds declined. In the United States, the Treasury’s benchmark 10-year note rose to 101 27/32, and the yield fell to 1.92 percent from 1.98 percent late Thursday, after touching a low of 1.89 percent during the day.

“Issue No. 2 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.

Mr. Ballew said that questions persisted about how much of the proposal would pass.

In addition, investors are awaiting a 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 sign 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.”

Volatility, as measured by the Vix, was just over 40, its highest level since Aug. 22, when it was 42.44.

Energy, financials and materials stocks lost the most on Friday, or more than 3 percent each.

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 S. P. 500 had not yet completed its recent correction.

“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 collapse, 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.

Jack Ewing and Nicholas Kulish contributed reporting from Frankfurt.

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