Stocks closed a dismal third quarter with a sharp loss after data showed only a slight increase in American consumer spending and an unexpected rise in European inflation.
Hurt by investor fears about the crisis in the euro zone and signs that the global economy may tip into recession, the July-September quarter was set to go down as the worst three months for global equities in years.
The Standard Poor’s 500-stock index was off more than 14 percent for the quarter — and more than 10 percent for the year so far. The German, French and Spanish market indexes also recorded their biggest quarterly losses in nine years, Reuters calculated.
The Commerce Department on Friday said consumer spending in the United States in August rose 0.2 percent, while incomes actually fell for the first time in nearly two years.
By the close, the S.P. 500 was down 2.5 percent for the day, shedding 28.98 points to 1,131.42. The Dow Jones industrial average ended 2.2 percent lower, off 240.60 points to 10,913.38, and the Nasdaq composite index lost 2.6 percent, or 65.36 points to 2,415.40.
The Dow ended the quarter down 12 percent and the Nasdaq lost 13 percent.
In Europe, consumer prices in the 17 European Union nations that use the euro rose 3 percent in September, after a 2.5 percent increase in August, the largest increase since October 2008.
Coming on the heels of data showing declining consumer confidence in Europe and evidence that the economy is slowing in much of the region, the inflation figures complicate the monetary policy challenge facing the European Central Bank, which has a primary responsibility to maintain price stability.
Still, said Ben May, an economist at Capital Economics in London, investors are right to continue expecting another move by the European Central Bank to cut interest rates by the end of 2011, noting that so-called “core” inflation, which subtracts energy and food prices because of their volatility, appeared to be well below the bank’s 2 percent target.
“What’s more, any rise is likely to prove temporary, given the recent signs that the recovery is coming to an end,” Mr. May said.
The United States Federal Reserve, the Bank of England, the Swiss National Bank and the Bank of Japan all have set their main overnight target interest rates at close to zero.
The Euro Stoxx 50 index, a barometer of euro zone blue chips, closed down 1.5 percent, while the FTSE 100 index in London slid 1.3 percent. The DAX in Germany lost 2.4 percent.
American crude oil futures for November delivery fell 1.8 percent to $80.68 a barrel. Comex gold futures rose 0.5 percent to $1,624.10 an ounce.
Wheat and corn futures traded in Chicago plunged by their daily limit, Bloomberg News reported, after a government report showed bigger inventories of wheat in the United States than forecast.
The dollar gained against most other major currencies. The euro fell 1 percent, to $1.3445, while the British pound rose 0.1 percent, to $1.5628. The dollar rose 0.4 percent against the Japanese currency, to 76.11 yen, and it rose 0.8 percent against its Swiss counterpart, rising to 0.9046 francs.
Asian shares were mixed, with both the Tokyo benchmark Nikkei 225 stock average and main Sydney market index, the S.P./ASX 200, essentially unchanged. But the Hang Seng index in Hong Kong fell 2.3 percent and in Shanghai the composite index fell 0.3 percent.
Bond prices were mostly higher, with the yield on the benchmark 10-year Treasury note dipping 9 basis points to 1.903 percent and the yield on the German 10-year falling 10 basis points to 1.9 percent.
David Jolly reported from Paris.
Article source: http://www.nytimes.com/2011/10/01/business/daily-stock-market-activity.html?partner=rss&emc=rss
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