The latest setback in Greece’s financial crisis sent the Standard and Poor’s 500 index to its lowest level of the year, putting it on the edge of a new bear market.
The index, the benchmark for most U.S. stock funds, has fallen 19.4 percent since its high for the year on April 29. A 20 percent drop would signify the start of a bear market, ending a bull market that began in March 2009. The S&P 500 has gained 76 percent since then, including dividends.
European markets slumped, dragging U.S. stocks down along with them, after Greece said it will miss deficit reduction targets it agreed to as part of its bailout deal. Benchmark indexes in Germany, France and Spain all fell 2 percent.
The Dow Jones industrial average fell 258.08 points, or 2.4 percent, to 10,655.30. The S&P 500 lost 32.19, or 2.9 percent, to 1,099.23. That’s below its closing low of 1,119 for the year, reached on Aug. 8.
Indexes measuring smaller stocks fell even more than the Dow and S&P, which are dominated by large companies. The Nasdaq composite slid 79.57, or 3.3 percent, to 2,335.83. The Russell 2000 index of small companies plunged 5.4 percent to 609.49.
All 10 company groups in the S&P index fell. Banks, energy, and consumer discretionary stocks had the steepest declines. The yield on the 10-year Treasury note fell to 1.75 percent from 1.91 percent late Friday as investors piled into lower-risk investments. The yield hit a record low of 1.71 percent on Sept. 22.
“The market is continuing to trade based on what is happening in Europe, and that is going to overshadow everything else,” said Quincy Krosby, market strategist at Prudential Financial. “The math (for the Greek bailout) didn’t add up a year ago, and the math doesn’t add up today. The market knows that and is waiting for the Europeans to acknowledge it.”
The renewed concerns about Europe’s debt problems pushed the euro down to $1.32 versus the dollar, a 9-month low. The stronger dollar could hurt large U.S. companies that rely on exports by making their products more expensive overseas. Coca-Cola Co. fell 3.2 percent to $65.42. Caterpillar Inc., which sells construction equipment globally, lost 4.5 percent to $70.55. Boeing, another large exporter, dropped 3.7 percent to $58.25.
“Everything that is coming out of Greece suggests that the dollar is only going to strengthen, which doesn’t bode well for the international firms,” said J.J. Kinahan, chief options strategist at T.D. Ameritrade. “It’s tough to be bullish on anything at the moment.”
The Dow briefly turned higher after 10 a.m., when the Institute of Supply Management said its gauge of U.S. manufacturing did better than Wall Street had predicted in September. The Dow and S&P turned mixed within 20 minutes, then took a sharp slide shortly after noon.
The slump started the market off on a weak note for the fourth quarter. Concerns that the U.S. economy is headed for another recession helped send the S&P 500 index, the basis for most mutual funds that invest in U.S. stocks, down 14 percent over the three months that ended in September. It was the worst quarter for the stock market since the financial crisis of 2008.
Some investors are also concerned that Friday’s jobs report will show that unemployment rose from 9.1 percent in September. “If I had to bet, I would say it’s more likely that more jobs have been lost than a surprise to the upside,” said T.D. Ameritrade’s Kinahan.
In corporate news, AMR Corp., the parent company of American Airlines, plummeted 33 percent to $1.98 as concerns flared up again that the company could be headed for bankruptcy protection. The stock hadn’t closed below $2 since 2003. American is considered the most vulnerable among U.S. carriers to an economic downturn.
Bank of America Corp. plunged 9.6 percent to $5.53, the lowest price for the stock since the financial crisis in 2008. The company has fallen 59 percent since January as investors fret that the nation’s largest bank will be hit with more settlements over mortgage securities that lost value after the housing bust.
Yahoo Inc. gained 2.7 percent, to $13.53, after the head of Chinese Internet company Alibaba Group Holdings said he would be interested in buying the company. Yahoo, which recently ousted Carol Bartz as its CEO, has been trying to decide whether to sell parts of the company.
Nine stocks fell for every one that rose on the New York Stock Exchange. Volume was heavy at 5.8 billion shares.
Bank of America’s homepage and online banking service are experiencing problems.
A message on the home page said the site was temporarily unavailable. Some visitors who tried to sign onto their accounts were greeted with the message that the site was “operating slower than usual” and that the bank was working to restore service.
A company spokeswoman said the problems began around 9:15 a unsecured personal loans.m. Friday, but that customers can still bank via text message and at ATMs. She said problems weren’t the result of hacking.
The outage came a day after the bank said it would start charging a $5 monthly fee for debit card purchases.
Forecasters say Tropical Storm Hilary has strengthened in the eastern Pacific south of Mexico and is expected to become a hurricane sometime Thursday.
Hilary has maximum sustained winds of 50 mph (85 kph). The U.S. National Hurricane Center reported at 11 p.m. EDT Wednesday that Hilary continues to strengthen over warm waters. Hilary was centered about 95 miles (155 kilometers) south of Puerto Escondido, Mexico, and moving west-northwest at 7 mph (11 kph).
Meanwhile, Tropical Storm Ophelia is moving across the Atlantic with top sustained winds of 60 mph (95 kph). The hurricane center says little change in strength is expected over the next two days.
Ophelia is centered about 1,065 miles (1,715 kilometers) east of the Leeward Islands, headed west at 15 mph (24 kph).
A strike deadline has now passed for Southern California grocery workers, but there is no word of any walkout just yet.
The three-day notice period required before calling a strike elapsed at 7:10 p.m. Pacific time Sunday, but union leaders said they intended to keep negotiating past the deadline.
United Food and Commercial Workers Local 770 spokesman Mike Shimpock said earlier Sunday that workers will stay on the job at least until midnight and possibly longer if talks are moving ahead.
Messages left for union and grocery representatives just after the deadline were not immediately returned.
Some 62,000 grocery employees have been working without a contract since March, while in discussions with negotiators for grocery chains Vons, Ralphs, and Albertsons.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.
A union representing workers at three major grocery chains in Southern California distributed picket signs Sunday, as the clock ticked toward the end of a three-day notice period required before calling a strike.
Union negotiators intend to keep talking if a resolution appears to be in sight when the period ends at 7:10 p.m. They also stressed that members could keep working beyond that time.
“Our workers will stay on the job until at least midnight, and possibly longer if negotiations are moving ahead,” said Mike Shimpock, spokesman for United Food and Commercial Workers Local 770, one of the unions representing the 62,000 workers seeking a new contract.
If little progress is made toward settling disagreements over health benefits, negotiators said they will tell members to walk off the job.
The grocery workers have been working without a contract since March, while in discussions with negotiators for The Vons Cos. Inc.; Ralphs Grocery Co., a subsidiary of The Kroger Co.; and Albertsons, owned by Supervalu Inc.
Representatives for the supermarket chains said last week they were disappointed that the unions had taken that step but remained committed to reaching an agreement.
Kendra Doyel, a spokeswoman for Ralphs, said Sunday the supermarkets remained hopeful a deal would be reached before the deadline.
Calls to representatives for Albertsons and Vons were not immediately returned.
A four-month strike and lockout that began in 2003 cost Ralphs and other grocery chains an estimated $2 billion.
Both sides in the current dispute announced in July that they had reached a tentative agreement on the employers’ contributions to pension benefits, but payments to the union health care trust fund remained a major sticking point.
Union members voted overwhelmingly to reject the health care proposal offered by the chains and to authorize their leaders to call a strike.
Union officials said they were responding to what they characterized as the chains’ delaying tactics when they issued the required 72-hour notice Thursday evening to cancel the contract extension under which they had been working.
Yahoo’s stock rose nearly 5 percent on Wednesday after the company fired its CEO following more than 2 1/2 years of financial lethargy.
Tuesday’s ouster came as investors were convinced that Carol Bartz couldn’t steer the Internet company to a long-promised turnaround.
To fill the void, Yahoo’s board named Tim Morse, its chief financial officer, as interim CEO. Bartz, who became CEO in 2009, lured Morse away from computer chip maker Altera Corp. two years ago to help her cuts costs. Yahoo said it is looking for a permanent replacement.
Yahoo Chairman Roy Bostock, also a target of shareholder frustration, informed Bartz about the move over the phone, according to an e-mail the outgoing CEO sent from her iPad that was obtained by the All Things D technology blog. The blog first reported Bartz’s ouster.
Yahoo didn’t return requests for comment Tuesday and Wednesday.
Bartz’s rude dismissal “made you feel a little bit like you were watching some reality TV show,” Forrester Research analyst Shar VanBoskirk said Wednesday.
Macquarie Securities analyst Ben Schachter said the handling of Bartz’s departure was unseemly and a sign of even more drama to come at Yahoo.
In a research note late Tuesday, Schachter predicted there will be a wide range of conjecture about Yahoo’s future, with the most likely speculation centering on Yahoo as a takeover target during a vulnerable time.
Alternatively, Yahoo could make a bold move itself by trying to buy the online video site Hulu.com, which is already talking to suitors, or trying to sell its 43 percent stake in the Alibaba Group, one of China’s most prized Internet companies. Bartz’s tense relationship with Alibaba CEO Jack Ma had fed investor dissatisfaction about her leadership.
Youssef Squali at Jefferies & Co. said that the Internet company’s challenges, and the fact that Bartz was Yahoo’s third CEO in four years, will make it tough for the board to find an “A player” for the job.
Squali said Yahoo could be sold to a large media company like News Corp. or be bought by some sort of consortium that could feature Microsoft Corp. or AOL Inc.
“In all, we believe that it is more likely that the board reaches an agreement to sell the company or parts of the company before a new CEO is found,” Squali wrote Wednesday.
In a statement Tuesday, Yahoo said it is undergoing a “comprehensive strategic review” in its latest effort to give investors a reason to buy its stock, but the company didn’t offer details.
Bartz, 63, led an austerity campaign helped boost Yahoo’s earnings, but the company didn’t increase its revenue even as the Internet ad market grew at a rapid clip.
The financial funk, along with recent setbacks in Yahoo’s online search partnership with Microsoft Corp. and the Alibaba investment, proved to be Bartz’s downfall. Her ouster comes with 16 months left on a four-year contract that she signed in January 2009.
That contract entitles her to severance payments that could be two to three times her annual salary and bonus, along with stock incentives she received during her tenure. Bartz received a $2.2 million bonus to supplement her $1 million salary last year.
Yahoo has now replaced three CEOs in a little over four years. During that time, Yahoo has lost ground in the Internet ad race to online search leader Google Inc. and Facebook even though its website remains among the world’s most popular.
Known for her no-nonsense leadership and sometimes gruff language, Bartz arrived at Yahoo as a respected Silicon Valley executive who had won praise for turning around business software maker Autodesk Inc. But she had no previous experience in Internet advertising, the main way Yahoo makes money.
That hole in her resume immediately raised questions whether she was qualified for the job, and those doubts only escalated as Yahoo’s revenue continued to sag.
At first, Bartz blamed bad timing; she started the job during some of the bleakest months of the Great Recession. Later, she would say that she inherited such as mess from her two predecessors, Yahoo co-founder Jerry Yang and former movie studio boss Terry Semel, and that it would take time to get Yahoo back on the right track.
At one point, she even compared her challenge to those that faced Steve Jobs when he returned to Apple Inc. as CEO in 1997.
Unlike Jobs, Bartz never was able to articulate a strategy to win over investors.
“She focused on plugging holes in the ship instead of turning it around,” said Gartner Inc. analyst Ray Valdes.
The disappointing performance was reflected in Yahoo’s stock price, which closed Tuesday at $12.91. That’s 81 cents, or 7 percent, higher than where Yahoo shares stood when Bartz was hired as CEO. During the same period, Google’s stock price has risen by more than $200, or 66 percent, and the technology-driven Nasdaq composite index has climbed by 60 percent. A group of investors led by Goldman Sachs Group concluded privately held Facebook is worth $50 billion in an appraisal done earlier this year. That’s triple Yahoo’s current market value.
Bartz never hit any of the price targets that the board set for her when she was hired. That means none of the 5 million stock options that she received upon signing her contract had vested by the time she was ushered out the door.
Investors seemed happy to see Bartz go. On Wednesday, the Sunnyvale-based company’s stock rose 61 cents, or 4.7 percent, to $13.52.
Although Bartz’s exit as CEO came suddenly, her departure isn’t a shock. The pressure to replace her grew earlier this year after Bartz acknowledged Yahoo’s search partnership with Microsoft wasn’t producing as much revenue as the companies anticipated.
Then, in May, Yahoo stunned investors by disclosing that Alibaba had spun off an online payment service in a move that threatened to diminish the value of Yahoo’s investment in the Chinese company.
Alipay in July agreed to a complex settlement that could eventually be worth more than $1 billion to Yahoo, but there were too many uncertainties in the deal to placate shareholders.
Bostock had steadfastly stood behind Bartz whenever she was attacked by investors or analysts. In a Tuesday statement, Bostock thanked Bartz for “her service to Yahoo during a critical time of transition in the company’s history” without providing an explanation for why the board decided to replace her.
BGC partners analyst Colin Gillis said Yahoo’s board “has got to look in the mirror here.”
“Swapping the CEO without swapping the (board) chair doesn’t solve your problem,” he said. “The person that hired Carol to begin with deserves to share the culpability.”
To help Morse, Yahoo set up an “executive leadership council” that includes some of the executives that Bartz recruited, including the company’s products guru Blake Irving and the head of its North American operations, Ross Levinsohn. While he worked for News Corp., Levinsohn helped put together the Hulu video site and is seen as a possible CEO candidate.
Analysts also have speculated that David Kenny, an Internet veteran who joined Yahoo’s board in April, might be a candidate for Yahoo’s CEO job. Kenny is currently president of Internet networking services provider Akamai Technologies Inc.
With its stock sagging and its management in limbo, Yahoo could be more vulnerable to a takeover attempt by a private equity group or another opportunistic bidder attracted to what remains one of the Internet’s best-known brands. Microsoft offered to buy Yahoo for $47.5 billion, or $33 per share, in 2008 only to be rebuffed.
Asian markets opened lower Tuesday after fears of a worsening global economy sparked a session of free-falling losses in Europe.
Oil prices fell to below $84 a barrel in Asia as investor fears of a recession in developed countries sent equities and commodities lower. The dollar was higher against the euro but lower against the yen.
Japan’s Nikkei 225 index dropped 1.2 percent to 8,676.12. Hong Kong’s Hang Seng index was 1 percent down at 19,420.47. Australia’s S&P ASX 200 lost 1.1 percent to 4,095.50. South Korea’s Kospi index was 0.6 percent down at 1,774.73.
The slump in Asia comes a day after European shares booked sharp losses. Britain’s FTSE 100 closed the day down 3.6 percent to 5,102.58. Germany’s DAX tumbled a massive 5.3 percent to 5,246.18, and France’s CAC-40 plummeted 4.7 percent to 2,999.54.
A wave of negative sentiment was unleashed Friday by a government report that said the U.S. economy failed to add any new jobs in August. That caused European and Asian stock markets to sink sharply Monday.
The August jobs figure was far below economists’ already tepid expectations for 93,000 new U.S. jobs and renewed concerns that the U.S. recovery is not only slowing but actually unwinding.
U.S. hiring figures for June and July were also revised lower, adding to the gloom. The unemployment crisis has prompted President Barack Obama to schedule a major speech Thursday night to propose steps to stimulate hiring.
The health of the U.S. economy is crucial for the wider world because consumer spending there accounts for a fifth of global economic activity. The U.S. imports huge amounts from Japan and China and is closely linked at all levels with the European market.
Traders are hoping for signs that the Federal Reserve might take action at its September meeting to support the economy _ perhaps a third round of bond purchases, dubbed quantitative easing III or QE3.
Wall Street, which was closed Monday due to the Labor Day holiday, was bracing for losses Tuesday.
Benchmark oil for October delivery was down $2.47 to $83.98 in electronic trading on the New York Mercantile Exchange. Crude last settled at $86.45 on Friday because U.S. markets were closed Monday for the holiday.
In London, Brent crude for October delivery was steady at $110.08 on the ICE Futures exchange.
In currencies, the euro weakened to $1.4074 Tuesday from $1.4187 in New York late Friday as worries mounted about Greece’s ability to meet requirements set by international lenders to stave off a massive default on the country’s debts.
The dollar weakened to 76.82 yen from 76.87 yen. Last month, the dollar fell under 76 yen, which was a new post-World War II high for the Japanese currency.
ST. LOUIS
You’ve heard the refrain: Buy and hold.
The idea is that although stocks might be declining, you can’t determine how long the pain will last. And ultimately you want to have some money invested in stocks or stock funds so you are ready to catch one of the benevolent periods that invariably will arrive and make your money grow.
You might recall the last excruciating period. Stocks fell about 57 percent from late 2007 to early 2009. In March 2009, the recovery took investors by surprise and lifted the stock market about 70 percent into the next spring. That surge didn’t fix all the damage, but it sure helped.
Keep in mind, if you intend to live by the buy-and-hold motto, that doesn’t mean you have to hold on to everything. It means you don’t flee the stock market completely but don’t have to embrace a mutual fund that’s been unreliable. Funds vary. Some are more aggressive and can be extreme losers in down periods. Others are more defensive
The leaders of France and Germany said Wednesday that they want the heads of the eurozone countries to elect the president of a new “economic government” who would direct regular summits to respond to the continent’s financial crisis.
For many in the markets, the proposal fell short of hopes: a grand plan to save the euro and, in particular, a sign the eurozone was moving toward a single bond issued by the 17 countries.
French President Nicolas Sarkozy and German Chancellor Angela Merkel outlined their proposals in a letter to Herman Van Rompuy, president of the European Council. They said that they hoped Van Rompuy would get the job.
The two leaders, who met in Paris on Tuesday, called the twice-yearly summits “the cornerstone of the new economic government of the eurozone.”
However, heads of the eurozone governments already hold summits, though not regularly scheduled ones, under the chairmanship of Van Rompuy. The first was in 2008.
Sarkozy and Merkel also raised the politically sensitive issue of pensions, saying eurozone states should rapidly implement structural reforms, including changes in “retirement policy.” They did not elaborate.
As global stocks fell, shares in stock exchange operators were hit particularly hard on news the two leaders want to introduce a tax on financial transactions. Deutsche Boerse slid 3.7 percent and the London Stock Exchange Group PLC was down 4.7 percent. Merkel and Sarkozy said the two countries’ finance ministers would come up with a proposal by September that would be forwarded to the European Commission.
A transaction tax _ a small percentage taken from foreign exchange and share transactions, for instance _ has been proposed as a source of money to pay for bank bailouts. But European Central Bank head Jean-Claude Trichet says it would only work if introduced globally. The U.S. is also against the idea.
Yusuf Heusen, senior sales trader at IG Index, said the news was hurting the shares. “It’s worth bearing in mind, however, that this is simply a proposal and there are many hurdles to be overcome, but without doubt it’s going to be squarely in focus in the weeks and months ahead.”
German Chancellor Angela Merkel’s spokesman, Steffen Seibert, said the proposals would bring a “higher level of commitment” to efforts to stabilize budgets and fight debt payday loan online. Yet Wednesday’s letter seemed to back away from the boldest proposal Sarkozy had put forward a day earlier _ the creation of a eurozone economic government. The letter gave few details and described it primarily as a reinforcement of current policies.
Former Belgian Prime Minister Guy Verhofstadt told VRT radio the biannual summits would “absolutely not create an economic government,” and called the proposal window dressing.
A prominent opposition lawmaker in Germany was equally unimpressed.
“What has been proposed here isn’t a European economic government, but that Mr. Van Rompuy will be allowed to give an occasional report to Ms. Merkel and Mr. Sarkozy,” Juergen Trittin, a co-leader of the Greens’ parliamentary group, told Radio Eins.
Analysts said the proposals would do little to pull Europe out of its quagmire.
“It’s all very long-term stuff, which is why the outcome’s been quite disappointing,” said Jennifer McKeown, a European economist at Capital Economics. “It doesn’t address the current problems.”
She said Sarkozy and Merkel had avoided the only real solution: a close fiscal union in which struggling countries could receive aid quickly without long negotiations. The eurobond would be one likely outcome of a closer union and would allow weaker countries to borrow more cheaply since the bonds would be backed by the entire eurozone. It might, however, raise costs for a powerhouse like Germany.
Sarkozy and Merkel said Tuesday that a eurobond might eventually be created, but not in the near future. Eurobonds are viewed with suspicion in Germany, where critics say they would encourage other countries to continue running up debt.
Without such a move, the eurozone is doomed, said McKeown.
“The likely outcome is the eurozone ceases to exist,” she said, though the stronger core countries, like Germany, the Netherlands and France, might continue to band together.
President Hugo Chavez accused his opponents on Thursday of representing U.S. interests and trying to stir up discontent in Venezuela’s military while he undergoes cancer treatment in Cuba.
Chavez addressed the nation on television twice by phone, saying he was in bed receiving a fourth consecutive day of chemotherapy and expected to return to Venezuela soon.
He mocked his opponents, saying their coalition is “of the United States.”
“All of those attacking the Armed Force are subordinated to imperialism,” Chavez said, using the formal name for the Venezuelan military. “They’re following the orders of imperialism, trying to divide the Armed Force, trying to demoralize it.”
He did not give details but referred to recent criticisms of some top generals by opponents, and he warned his foes: “Leave the Armed Force alone.”
Chavez said the military’s response to any provocations from his opponents should be to notify state intelligence agencies and remain unified.
The opposition coalition responded with a statement saying the president’s remarks “show the tension that exists within the government.”
“The head of state should worry about what’s happening within his government,” the opposition coalition said. “The message is for you, Mr. President: Leave the Armed Force alone. Don’t oblige Venezuelan soldiers to say slogans in favor of you or your political ideology.”
Chavez, who says he is trying to install a socialist system in Venezuela, made his remarks during a televised gathering of soldiers in a helicopter unit. After two days without speaking publicly, Chavez appeared eager to assert himself both in domestic and international affairs.
He said he was sorry to see the unrest in London. He referred to the U.S. government’s debt woes and said, “The empire is sinking.”
“It’s a terrible crisis they have. It’s capitalism,” Chavez said.
Chavez urged his military to be ready for any possible conflict like those in Libya and Syria. He reiterated his long-standing concerns about a potential conflict with the United States, saying: “They’re like a wounded lion.”
Despite Chavez’s tensions with Washington, Venezuela continues to rely heavily on oil sales to the United States, which is its top client.
Chavez said the current economic crisis will affect Venezuela but that his government has been diversifying and becoming more independent.
He said officials planned to sign an agreement with China on Thursday finalizing a new $4 billion loan to be repaid in oil. The leftist leader said Venezuela no longer “depends on the Yankees, the Yankee banks.”
Russia is also providing a $4 billion loan to Venezuela for arms deals and other purposes, Chavez said.
As for his cancer treatment, Chavez said his body has been responding well. He underwent surgery in June to remove a tumor from his pelvic region, and says the chemotherapy aims to ensure that no malignant cells reappear.
Chavez dismissed a protest by bus drivers in parts of Venezuela on Thursday, saying he believes political adversaries were behind it.
He also expressed confidence about the presidential vote expected in late 2012. “We’re going to knock them out,” Chavez said.
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