Stocks decline on signs of slowing global economy

It was another down day on the Street, with the familiar reason: Worry about the recovery and Europe. Story, A20.
It was another down day on the Street, with the familiar reason: Worry about the recovery and Europe. Story, A20. (AP)
Posted: April 18, 2013

NEW YORK - As evidence of a slowing global economy grows, investors are showing some caution just one week after U.S. stocks hit an all-time high.

Stocks fell Wednesday after lackluster earnings from Bank of America and an apparent drop in demand for Apple's iPad and iPhone dragged financial and technology stocks lower. New signs of weakness in Europe, where car sales are plunging and unemployment is rising, also weighed on the market.

The Dow Jones industrial average fell 138 points, or 0.9 percent, to 14,618.59 Wednesday, wiping out most of the gain it made Tuesday. The Dow, which reached an all-time high of 14,865 last Thursday, is down 1.7 percent this week after slumping 265 points Monday.

The Standard & Poor's 500 index dropped 22 points, or 1.4 percent, to 1,552 and is 2.2 percent lower since the opening bell Monday. The S&P is 2.5 percent below its all-time high of 1,593.

The Nasdaq composite index fell 59.96 points, or 1.8 percent, to 3,204. Apple, which makes up 8 percent of the index, slumped 5.5 percent to $402.80, after a supplier hinted at a slowdown in iPhone and iPad production.

Energy companies and miners suffered Wednesday as commodity prices extended their declines. The price of crude oil dropped for the fourth day in five, falling 2.3 percent to $86.68 per barrel, based on expectations that global demand will fall. Copper fell to an 18-month low of $3.19 a pound.

As stock prices sank, investors sought the safety of bonds. The yield on the 10-year Treasury note, which moves inversely to its price, fell to 1.70 percent from 1.73 percent. It went as low as 1.68 percent, matching its lowest level of the year.

Despite the big drops this week, the Dow is still 11.6 percent higher this year, the S&P 500 index 8.8 percent. And while falling energy prices may hurt energy stocks now, in the long run they should put more money into the pockets of consumers and drive spending.

Stocks surged during the first three months of the year on optimism that a recovery in the housing market would boost the economy. But the stock market has struggled this month. Reports of weak hiring and retail sales suggested the economy may be cooling off.

"You've had numerous economic data points that have been not really disastrous, but not really as robust as people might like," said Cam Albright, director of asset allocation at Wilmington Trust Investment Advisors. "When you have a market as extended as this, you almost need perfect information to make it continue to go up."

Corporate earnings for the first quarter suggest that growth has been slow and steady rather than vigorous, as investors had hoped, said Kevin Mahn, president of Hennion & Walsh Asset Management. Consumers and businesses are still reluctant to ratchet up spending.

"We're moving ahead, but begrudgingly and very slowly," said Mahn.

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