With the Thanksgiving weekend over, nail biting returned to Wall Street on Monday.
Fresh evidence of a softening global economy, along with profit-taking after last week’s big rally, put a decisive end to the stock market’s five-day winning streak.
The Dow Jones industrial average sank almost 700 points after manufacturing activity was reported to have plunged worldwide and the U.S. was officially pronounced to be in a nearly year-old recession.
Even though retail sales over the weekend generally were better than expected, the data reminded investors that the economy remains locked in a brutal free fall likely to last well into next year.
“We’re still in this bear market,” said Joe Cusick, senior market analyst at brokerage OptionsXpress in Chicago. “We’re now in a confirmed recession, and it’s not going to end in a couple of months.”
The Dow sank 679.95 points, or 7.7 percent, to 8149.09, its fourth-biggest point loss ever. Four of the top five point declines have come since mid-September. The Dow gave back more than half the gains from its explosive five-session advance that began Nov. 21.
The Standard & Poor’s 500 index cratered 80.03 points, or 8.9 percent, to 816.21. The Nasdaq composite index fell 137.50 points, or 9 percent, to 1398.07.
Wall Street experts said they anticipated stocks would give back some of last week’s gains, and many clung to hope that the sell-off would be brief.
“We’re having a normal pullback in saw-tooth fashion,” said Tom Wirth, senior investment officer at Chemung Canal Trust Co. in Elmira, N.Y. “I expect the rest of this year we’re going to see higher highs and higher lows.”
Nevertheless, the slide reflects the mood swings that continue to afflict the market, causing extreme share-price volatility.
Yields on Treasury bonds fell sharply after Federal Reserve Chairman Ben Bernanke said the central bank might purchase Treasury bonds to stimulate the economy.
The yield on the 10-year Treasury note fell to 2.73 percent. That’s down from 2.92 percent on Friday and is a full percentage point below its average over the last year.
