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U.S. Stocks Falls As Investors Lose Hope

U.S. stocks plummeted as investors started giving up on the dream that another global recession could be avoided.


U.S. stocks fell as investors started giving up on the dream that another global recession could be avoided.

According to Reuters:

Stocks fell for the fourth straight session in a broad selloff with trading volume heavy, surpassing the daily average roughly 90 minutes before the close. It was a sign investors were fleeing riskier assets with conviction.

The Dow Jones industrial average dropped 404.37 points, or 3.63 percent, to close at 10,720.47. The Standard & Poor's 500 Index fell 37.28 points, or 3.2 percent, to 1,129.48. The Nasdaq Composite Index lost 82.78 points, or 3.26 percent, to finish at 2,455.41.

“The storyline is that global growth is decelerating,” Mike Ryan, the New York-based chief investment strategist at UBS Wealth Management Americas, told The Associated Press. “Financial stresses are rising and policymakers are finding few viable options to stabilize the real economy.”

Investors took notice that the U.S. Federal Reserve felt compelled to take additional steps to avoid a recession by announcing “Operation Twist” yesterday.

Frustration with the lack of progress in fixing Europe’s debt crisis and data that showed China’s once-booming manufacturing sector had contracted for a third consecutive month contributed to investors’ pessimism, according to Reuters.

After Thursday’s trading, another index had entered a bear market, which is a drop of at least 20 percent from a peak, Bloomberg News reports. The MSCI All-Country World Index, an index of developed and emerging-market stocks, fell 4.9 percent, ending the day more than 20 percent lower than its May 2 high. The only developed markets out of 24 that aren’t in bear markets at this point are the U.S., the U.K., Canada, Singapore and New Zealand.

Some analysts thought the heavy selling was an overreaction, the AP reports. "The facts show we are not in a recession, and we are not borderline recession," Chris Rupkey, chief financial economist with Bank of Tokyo-Mitsubishi, wrote in a report Thursday.