Dow Slides 345 Points Amid Gloomy Economic Reports
The Dow Jones industrial average plummeted 345 points on Thursday on a confluence of poor news about the economy, although investors could not pin the drop on any overriding reason.
Reports showed that retail sales were weak in August, just as more Americans filed for unemployment benefits. Anxiety lingered about a global slowdown. Fears of another financial crisis refused to go away.
None of the news came as a shock to Wall Street. So what pushed the Standard & Poor’s 500-stock index down 3 percent, its worst daily performance in three months?
“Boy, it’s hard to say,” Douglas M. Peta, a market strategist at J&W Seligman & Co., said after the market’s close. “All of us were scratching our heads. Why today?”
Explanations were proffered, but rarely proved. Speculation ran rampant that some major hedge funds were rapidly selling off their assets; Atticus Capital, a $14 billion hedge fund based in New York, was forced to issue a statement denying that it was shutting down.
Two prominent regional banks, National City and First Horizon, had their credit ratings slashed by S&P on concerns about credit and losses related to subprime mortgages. Bill Gross, the head of Pacific Investment Management, said banks were at risk of a coming “financial tsunami.”
The Labor Department reported that the number of Americans who filed initial claims for unemployment benefits last week rose to 444,000, near a five-year high. And retailers said that sales were weak in August, as consumers opted to shop at discount stores. The reports suggested that profits at many American retailers would continue to fall even as gas prices come down.
By the end of the session, the S&P 500, the broadest measure of the American stock market, had sank back into a bear market. The Nasdaq composite index lost 3.2 percent.