Stock Markets Plunge Over Economy

STL Today
August 5, 2011

A bad case of the double-dip willies sank the stock market Thursday, with the Dow Jones industrial average tumbling 4.3 percent as investors worried that America might soon slump into recession again.

The Dow dropped 513 points to 11,384, suffering its worst day since the 2008 financial meltdown. The benchmark stock index has now lost 10.5 percent in just two weeks, erasing its entire gains for the year.

“A shiver of fear is going through the market,” said Mark Keller, who manages $1 billion at Confluence Investment Management in Webster Groves. “It’s fear of recession.”

Investors fretted over two weeks of bad economic news, and worried that this morning’s report on the July job market would confirm the worst.

Meanwhile, the European sovereign debt crisis was creeping into Spain and Italy, raising fears that the continent will need an even bigger bailout to avert a financial crisis.

Investors are concerned that the combination may drag the world back into recession. Most economists aren’t predicting that, and Keller puts the chances at just one in three.

On Thursday, investors fled to safe, short-term investments. They drove the yield on three-month Treasury bills down to one-hundredth of 1 percent.

Thus, a week that began with worries that Uncle Sam might default on his debts ended with investors’ handing the government money for nearly nothing.

One giant bank decided to make a profit on the trend.

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