The Dow shed 737 points in its biggest weekly drop since October 2008.
Investors have been weathering a period of persistent uncertainty over the pace of economic growth and the problems in the euro zone. This has sent stocks down and bonds up. Gold, traditionally a safe haven asset, fell $101.70 to $1,637.50 on Friday, which some analysts partly attributed to selling by hedge funds or investors trying to raise cash.
Analysts said recent losses in the financial markets were related to concerns about whether the governments of developed economies were doing enough to support growth. The declines also reflected broad pessimism about the debt crisis in the euro zone and intensifying fears about the economic outlook, despite the release of a statement late Thursday in Washington by the world’s major economies that reiterated their commitment to the stability of banks and financial markets.
The statement by the Group of 20 nations did not, however, include commitments to new action or any talk of additional support for Europe.
“All in all, there appeared to be nothing in the way of concrete new action, and markets were generally underwhelmed,” said Sue Trinh, senior currency strategist at RBC Capital Markets.
The Dow wavered in a narrow range on Friday, closing up 37.65 points, or 0.4 percent, at 10,771.48, after a decline of 3.5 percent on Thursday, its largest drop since Aug. 18, and a day after the Federal Reserve announced new stimulus measures. The broader Standard Poor’s 500-stock index closed up 6.87 points, or 0.6 percent, at 1,136.43. The two indexes each fell more than 6 percent this week.
The Nasdaq composite index gained 27.56 points, or 1.1 percent, to 2,483.23 on Friday to finish the week 5.3 percent lower.
In Europe, the FTSE 100 in London rose 0.5 percent, the CAC 40 in Paris gained 1 percent and the DAX in Frankfurt added 0.6 percent.
The yield on the 10-year United States Treasury note rose to 1.83 percent after hitting a new low of 1.72 percent late Thursday. The price fell 1 1/32 to 102 21/32.
Yields have declined since the Federal Reserve announced Wednesday that a complete economic recovery was still years away and that there were “significant downside risks to the economic outlook, including strains in global financial markets.”
The Fed also said that it would buy long-term Treasury bonds and sell short-term bonds to help stimulate lending and growth.
Some analysts attributed the market declines to disappointment that the Fed did not act more forcefully and to little faith that policy tools like lower interest rates could encourage consumers to spend more when they were already worried about jobs.
“The Fed just moved the deck chairs,” said Steve Blitz, the senior economist for ITG Investment Research. “When you see a 10-year Treasury trading at 1.7 percent, the market is telling you that real growth over the next 10 years is going to be zero.
“So it is not so much deflation, but that no one sees the growth that is going to generate demand to borrow,” Mr. Blitz added. “You need confidence to borrow. If people had confidence, they would be falling all over themselves to borrow.”
As gold fell, the dollar rose, and the price for benchmark light, sweet crude oil futures contracts was flat at $80.50 a barrel on the New York Mercantile Exchange.
The weakness in commodities prices suggested to some analysts that investors were starting to bet that the likelihood of a recession in major economies was increasing.
Andreas Hürkamp, chief equity analyst at Commerzbank in Frankfurt, said declines in commodity prices and fears about a possible default by Greece offset an initial rally on Friday.
“Until recently, commodity prices had been stable despite the weakness in equities,” Mr. Hürkamp said. “Now that seems to be changing.”
Energy and materials stocks, particularly susceptible to demand related to the economic outlook, were down. Financials were more than 1 percent higher.
Brian M. Youngberg, energy analyst for Edward Jones, said concerns over the global economy had thrown future oil demand into question.
“It is kind of the calm after the storm today,” he said. “There was significant panic yesterday with some data out of China maybe signaling that the Chinese economy may be slowing its growth rate, and then on top of that concerns of a double-dip recession in the United States and ongoing concerns about Europe.”
“All those factors caused investors to take risk off the table and avoid sectors that are viewed to be tied to the economy,” Mr. Youngberg said.
Markets in Hong Kong, Australia, Singapore, Taiwan, Thailand, the Philippines and New Zealand also were lower on Friday but registered smaller losses than on Thursday.
Matthew Saltmarsh and Kevin Drew contributed reporting.
Article source: http://www.nytimes.com/2011/09/24/business/daily-stock-market-activity.html?partner=rss&emc=rss