S&P 500 Enters Bear Market as Stocks Continue to Plunge

S&P 500 Enters Bear Market on Europe Worries

October 4, 2011

Associated Press - The Standard & Poor's 500 index fell 1.6 percent early Tuesday, bringing it into what many consider to be a bear market. The yield on the 10-year Treasury note fell near a record low as investors piled into lower-risk assets.

Stocks fell broadly as investors worried that Greece might be edging closer to default, which would cause heavy losses for banks that hold Greek debt and rattle global financial markets. Greece has said it wouldn't be able to make budget cuts it had agreed to as part of a deal to receive emergency loans.

The S&P 500 fell 20 points, or 1.8 percent, to 1,079 as of 10:15 a.m. That brought the widely used index 21 percent below its April 29 high of 1,363, meeting the criteria of a bear market.

The Dow Jones industrial average lost 207, or 1.9 percent, to 10,448. The Dow is 18 percent below its recent peak, just shy of the 20 percent decline market watchers consider to be a bear market.

The Nasdaq composite dropped 28, or 1.2 percent, to 2,307.

Stocks Erase Early Losses on Hopes for Fed Action

October 4, 2011

Associated Press - ...In testimony before Congress, Federal Reserve Chairman Ben Bernanke said the economy is weaker than the central bank expected and that poor job growth continues to undercut consumer confidence. He warned Congress that deep spending cuts may impede a recovery.

Bernanke also said the central bank is prepared to take further steps to stimulate the economy. That could mean another round of asset purchases, a tactic known as quantitative easing, noted David Ader, chief government bond strategist at CRT Capital Group.

The yield on the 10-year Treasury note rose to 1.83 percent from 1.78 percent late Monday. It briefly went as low as 1.72 percent around 10 a.m., near its record low of 1.71 percent reached Sept. 22. Bond yields fall when their prices rise.

The S&P index has fallen every month since April on mounting concerns about the strength of the U.S. economy and the possibility that the debt crisis in Europe could get worse. The stock market is thought to be forward-looking, reflecting investors' views of the economy in 6 to 9 months.

The S&P 500 has anticipated all 11 recessions in the U.S. economy since 1948, according to Sam Stovall, chief equity strategist at Standard & Poor's. Stocks usually begin their descent about 7 months before a recession starts and drop an average of 30 percent.

European indexes also declined sharply. Benchmark indexes in Germany, France, and Spain each lost more than 2 percent.