Tuesday, August 2, 2011

Massive rout spells trouble for Wall Street

The S&P 500 turned negative for the year on Tuesday as the wrangling over the US debt ceiling faded and investors turned their attention to the stalling economy.

The broad-based index fell for a seventh day and crashed through the key 200-day moving average in an ominous sign for markets. The seven days of losses mark the longest losing streak since October 2008.

The Dow Jones industrial average dropped 265.87 points, or 2.19 percent, to 11,866.62. The Standard & Poor's 500 Index dropped 32.89 points, or 2.56 percent, to 1,254.05. The Nasdaq Composite Index dropped 75.37 points, or 2.75 percent, to 2,669.24.

European shares hit their lowest close in 11 months on Tuesday as weak global growth replaced the US debt ceiling row as investors' main concern and banks fell on worries about the euro zone peripheral debt crisis.

The pan-European FTSEurofirst 300 index of top shares fell 1.8 percent to 1,048.71 points, the biggest one-day fall since March and the lowest close since late August 2010.

The Nikkei average fell 1.2 percent after weak US manufacturing data fanned fears about the health of the global economy and pushed the dollar lower, although the heightened risk of intervention in currency markets by Japanese authorities lent support.

Data showed the US manufacturing sector grew at the slowest pace in two years in July, following similarly weak reports from much of Asia and Europe. This has made investors particularly jittery, especially ahead of US unemployment data on Friday.

The benchmark Nikkei finished at 9,844.59, erasing most of the gains it made the previous day. The next support level is seen at 9,750 , which is seen as a potential strike price for Nikkei 225 options.