March 2, 2021

U.S. Markets Drop as Further Signs of Weakness Sink In

Wall Street took a tumble at the opening of trading Tuesday, taking cues from markets in Europe and Asia. Analysts said that the drop, which hit financial stocks particularly hard, was a carry-over from last week’s disappointing unemployment report in the United States and from news that major American banks were facing a federal lawsuit related to their handling of mortgage securities.

In the United States, economic data was scrutinized for any signs of strength in the country’s recovery. The Institute for Supply Management said Tuesday that the services sector of the nation’s economy expanded in August, the 21st consecutive month it has done so, as reflected in the 53.3 reading on the I.S.M. index, although the expansion in some sectors like business activity were slowing down.

The survey exceeded forecasts assembled by Bloomberg News that pointed to a 51 reading. A reading of 50 is meant to be the dividing line between an expanding and a contracting economy.

Just past noon, the Dow Jones industrial average of 30 stocks was down 1.9 percent, or 214.56 points, to 11,025.70. The Standard Poor’s 500-stock index lost 1.9 percent, and the Nasdaq composite fell 1.7 percent.

The losses were reminiscent of those on Friday, when the Labor Department reported zero job growth in the United States economy in August.

“Friday set the tone with the employment report,” said Michael A. Mullaney, vice president of the Fiduciary Trust Company, and markets in Europe and Asia picked up the pessimistic baton on Monday. Debt concerns related to the euro zone, particularly over Greece and Italy; the bank lawsuits in the United States; and worries about economic growth were the biggest factors damping prices, Mr. Mullaney and other analysts said.

“We are basically hard struck to find out where the growth engines are going to come from,” Mr. Mullaney said.

Bank shares were hammered in the United States. Bank of America and Citigroup were each down more than 3 percent, after being lower by more than 5 percent. The financial, energy and industrial sectors each declined more than 2 percent.

Government bond prices were lower, with the yield on the United States 10-year note at 1.981 percent.

But most of the focus in the markets has been on the impact of global issues, and the market turmoil of recent weeks showed no signs of letting up. On Tuesday, gold rose to another nominal high, and the Swiss authorities took action to weaken the franc, which has soared because of its role as a haven.

A lack of progress in solving persistent euro zone debt problems “is creating a pocket of selling with no buyers,” said Alan B. Lancz, the president of Alan B. Lancz Associates.

Concerns about the outlook for the global economy and the sovereign debt crisis that is haunting the euro zone have created conditions worryingly similar to those of the sell-off that followed the collapse of Lehman Brothers in 2008, Deutsche Bank’s chief executive, Josef Ackermann, said Monday.

On Tuesday, European shares initially posted modest gains after a withering retreat Monday that knocked more than 4.1 percent off the broad market. But the momentum faded in afternoon trading, with the Euro Stoxx 50 index, a barometer of euro zone blue chips, down 1.3 percent and the FTSE 100 index in London just holding onto its gains.

Asian shares lost more ground. Having fallen 1.9 percent on Monday, the Nikkei 225 stock average in Japan sank an additional 2.2 percent on Tuesday, taking it to 8,590.57 points, its lowest close since April 2009.

“Key economic data continues to disappoint as global business sentiment surveys weakened further and the U.S. employment report printed well below market expectations,” analysts at Barclays Capital commented in a research note.

“Increasing concerns over global growth appear to have halted the brief rally in risk assets in the last week of August,” they noted, and investors are likely to remain edgy, and financial markets volatile, over the next few weeks.

Policy makers voiced similar concerns on Tuesday.

“Asia will not be immune to a global slowdown,” said Tharman Shanmugaratnam, the finance minister of Singapore, Reuters reported. “We are already at stall speed in the U.S. and Europe, which means we are now more likely than not to see a recession.”

In Zurich, the Swiss National Bank said it was setting a minimum value of 1.2 francs per euro and was prepared to spend an “unlimited” amount to defend it. The central bank was acting to help the country’s exporters, who fear being priced out of foreign markets by the strong franc.

The euro immediately rallied, rising as high as 1.24 Swiss francs from 1.11 francs late Monday. The euro has traded as low as 1.03 francs this summer.

Currency trading, which had been relatively quiet, was thrown into upheaval as the market sought a new equilibrium. The euro rose against the dollar, then fell back to $1.4083 from $1.4098 late Monday, while the British pound fell to $1.6045 from $1.6118. The dollar rose to 77.45 yen from 76.89 yen and soared to 0.8546 Swiss francs from 0.7872 francs.

Gold futures eased slightly to $1,875.30 after rising more than 1 percent to more than $1,900 an ounce in Comex trading.

David Jolly reported from Paris. Bettina Wassener contributed reporting from Hong Kong.

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