US stocks hit hard by recovery concerns

NEW YORK: US stocks tumbled Monday in their worst single-day loss in two months amid renewed concerns about the shakeout of the global financial crisis and conflicting signals about economic recovery.

The Dow Jones Industrial Average slumped 200.72 points (2.35 per cent) to end at 8,339.01, the largest one-day sell-off since April 20, adding to the nearly three per cent plunge suffered by the blue chip index last week.

The tech-dominant Nasdaq shed 61.28 points (3.35 per cent) to 1,766.19 while the broad-market Standard & Poor’s 500 index shed 28.19 points (3.06 per cent) to 893.04, dipping below the 900 level for the first time since May 28.A grim outlook by the World Bank and declining commodity prices led by oil added to nervousness as investors returned to the market Monday ahead of a two-day Federal Reserve policy meeting beginning Tuesday.

“Some traders took the Bank’s dismal forecast as confirmation of their growing suspicions about the recent rally, and the equities market plummeted with the sound of the opening bell,” said Elizabeth Harrow of Schaeffer’s Investment Research.

“With the spectre of weak demand effectively resurrected, energy and commodity stocks paced the day’s losses,” she added.The World Bank slashed its outlook for developing nations’ economies Monday, estimating growth at a meager 1.2 per cent this year while warning more measures were needed for a recovery to take hold.

The forecast amounts to steep drops from the previous two years.The market is also expected to closely gauge Federal Reserve’s comments after the meeting Wednesday that could offer clues on the timing and strength of an economic recovery.

Although the US central bank’s policy making body is widely expected to leave the federal fund rate at virtually zero per cent, analysts are expecting some comment on direction of monetary policy.

“The intrigue for the market lies in the directive and what it will say about the Fed’s economic view and its unconventional approach to handling policy matters today, as well as its state of preparedness for dealing with an exit strategy later,” said Briefing.com’s Patrick O’Hare.

The Fed had taken radical measures to flood the system with money to prime the economy which has contracted since December 2007. The market is looking for signals from the Fed about how and when it would ease these measures.-- AFP