Dow ends worst May in 70 years
By Alexandra Twin, senior writer
May 28, 2010
NEW YORK (CNNMoney.com) — Stocks cut losses but finished in the red Friday,
ending a dismal month that saw the Dow Jones industrials suffer their worst
May in 70 years, after a downgrade of Spain’s debt reminded investors that
Europe’s economic woes continue.
The Dow Jones industrial average (INDU) lost 122 points, or 1.2%, after
having been down as much as 186 points earlier in the session. The S&P 500
index (SPX) fell 14 points, or 1.2%, and the Nasdaq composite (COMP) dropped
21 points, or 0.9%.
Stocks were already weak before the ratings agency cut Spain’s debt one
notch. While the cut still leaves the debt in investment grade territory, as
opposed to junk, it nonetheless managed to rattle investors in a
“People were expecting a nice slow day and then the Spain news turned things
around,” said Joseph Saluzzi, co-head of equity trading at Themis Trading.
“It may have been anticipated, but It’s still a big deal,” he said. “It
tells us we are not out of the woods yet.”
Friday marked the end of a rough month on Wall Street in which stocks
plunged on worries about the European debt crisis, the weak euro and bets
that the market advance had outpaced any economic recovery.
The Dow lost 7.9%, according to early tallies, seeing its worst month since
February 2009, when it fell 11.7%, and worst May since 1940, when it plunged
The Nasdaq lost 8.3%, its worst month since November 2008, when it dropped
10.8%, and its worst May since 2000, when it skidded 11.9%.
The S&P 500 declined 8.2%, its worst month since February 2009, when there
was an 11% loss, and its worst May since 1962, when the drop was 8.6%.
Stocks rallied Thursday after China said it will stay invested in European
debt. The Dow jumped 285 points, or almost 3%, and the S&P 500 and Nasdaq
both gained more than 3%.
After such an advance, investors pled exhaustion Friday, with trading pretty
quiet as many market pros stepped out ahead of the Memorial Day weekend.
Stock declines were broad, with 27 of 30 Dow components falling, led by
Caterpillar (CAT, Fortune 500), Chevron (CVX, Fortune 500), Exxon Mobil
(XOM, Fortune 500), Hewlett-Packard (HPQ, Fortune 500), IBM (IBM, Fortune
500), 3M (MMM, Fortune 500), Johnson & Johnson (JNJ, Fortune 500).
The CBOE Volatility (VIX) index, or the VIX, Wall Street’s fear factor,
rallied 9% in afternoon trading.
0:00 /2:25Europe crisis: Wake-up call
Economy: A morning report from the Commerce Department showed consumer
income picked up last month, but spending didn’t follow suit.
Personal income rose 0.4% in April, matching the gain in March. Economists
surveyed by Briefing.com expected the 0.4% gain.
Personal spending was flat after rising 0.6% in the previous month. Spending
was expected to grow by 0.3%.
The Core PCE, the report’s inflation component, rose 0.1%, in line with
estimates, after increasing 0.1% in March.
The May consumer sentiment index from the University of Michigan rose to
73.6 from 73.3 last month. Economists expected it to ease to 73.2.
The Chicago PMI, a regional reading on manufacturing, fell to 59.7 in May
from 63.8 in April, versus forecasts for a drop to 60.
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Euro: The European currency has seesawed since falling to a four-year low of
$1.2146 last week.
On Friday, the euro fell 0.5% versus the dollar but remained above that
four-year low. The dollar fell 0.3% against the yen.
World markets: Markets in Europe ended mixed. Britain’s FTSE 100 lost 0.1%,
Germany’s DAX gained 0.1% and France’s CAC 40 lost 0.3%.
Asian markets ended higher. Japan’s Nikkei gained 1.3% and Hong Kong’s Hang
Seng rose 1.7%. China’s Shanghai Composite gained 1.1%.
Commodities: U.S. light crude oil for July delivery fell $1.08 to $73.37 a
barrel on the New York Mercantile Exchange.
COMEX gold for August delivery fell $4.40 to $1,210 an ounce.
Bonds: Treasury prices gained modestly, lowering the yield on the 10-year
note to 3.31% from 3.34% late Thursday. Treasury prices and yields move in
Trading volume: Market breadth was negative. On the New York Stock Exchange,
losers beat winners two to one on volume of 800 million shares. On the
Nasdaq, decliners topped advancers by almost three to one on volume of 1.41