Stocks
off $2.1 trillion this year Biggest June loss since Depression
By Adam Shell
NEW YORK - Hurt by a
record-setting run for crude oil and renewed concerns about the health of the
banking sector, Wall Street ended a dismal second quarter Monday with blue-chip
stocks on the cusp of their first bear market in almost six years.
After a 10,2% drop last month,
its biggest June loss since the Great Depression, the Dow Jones industrial
average is now at 11350, or 19.9% below its October all-time high. The Dow is
flirting with its first bear market — a drop of 20% or more — since the 2000-02
bursting of the internet bubble.
The
Wall Street is debating whether
the market has now priced in the hulk of the bad economic news, Bob Doll, chief
investment officer at BlackRock, said Monday he
believes the market is past the worst and should “grind higher” the rest of the
year
The big game changer has been
the 38% jump in the price of a barrel of oil to $140 in the April-June period.
That helped deepen the economic gloom that arose from the housing bust.
Stocks are likely to get a boost
if oil prices recede, because it will lift some of the financial pressure off
consumers and businesses struggling under the weight of $4.10-a-gallon
gasoline, says Tobias Levkovich, chief investment
Role of oil strategist at Citigroup.
Investors are closely watching
to see whether some see the broader S&P 500 index can stay above the recent
lows it set in mid-March and avoid falling into bear territory The S&g after a 3.2% second-quarter loss,
is 18.2% off its high.
The rise in oil prices has
coincided with a second round of handwringing over
the credit crisis, which first hit Wall Street’s radar last summer, Stocks
enjoyed a relief rally in April and May after a financial market meltdown was
averted in mid-March when JPMorgan Chase stepped in
to buy beleaguered in vestment bank Bear Stearns.
Fears about the health of banks
and brokerages resurfaced in June amid stock downgrades by analysts and
expectations that major U.S. financial institutions will write off additional
billion-dollar losses on bad mortgages when they report second- quarter
earnings in coming weeks.
There’s also concern that
companies will have trouble meeting optimistic profit outlooks for the rest of
2008. And investors are worried about inflation. The Federal Reserve has hinted
that it is done cutting interest rates, in part because it wants to give the
U.S. dollar a boost and dampen inflation.
If this turns into an official
bear market, it would still be relatively shallow so far compared with the 33
bear markets since 1900, says Ned Davis Research. The Dow has been declining
for 262 calendar days, which is shorter than the median bear market of 363
days. Its decline so far also is not as severe as the 2(19% median. That
suggests more pain can’t be ruled out, says NOR’s
chief investment strategist, Tim Hayes.