NEW YORK — Investors around the world are betting that even with government stimulus and bailout programs, the global recession will just have to run its course.
The problems that slammed stocks last year — ailing banks, foundering automakers, tumbling home prices and cash- strapped consumers — haven’t let up.
Instead, the issues have festered and are threatening to push U.S. stocks back to levels not seen since the late 1990s.
As President Barack Obama signed a $787 billion stimulus bill in Denver and automakers scrambled to come up with restructuring plans Tuesday, the Dow Jones industrial average closed down 297.81 points, or 3.79 percent, at 7,552.60 — just above its post-meltdown Nov. 20 close of 7,552.29, which was its lowest close in 5 1/2 years.
“You’re looking at a crescendo, if you will, of uncertainty,” said Richard Cripps, chief market strategist for Stifel Nicolaus. “We’re still in that period where more information needs to come out.”
The drop on Wall Street followed sharp pullbacks on overseas exchanges; investors around the world were looking at the reality of a delayed recovery — delayed for who knows how long.
“We don’t think the recession’s over until at least the middle of the year, and that’s even starting to seem very early,” said JPMorgan equities analyst Thomas J. Lee, adding that the market’s worries are “nothing new — the magnitudes are worse.”
The stock market is usually regarded as a forward-looking mechanism, but Lee pointed out that about one-third of the time, the Standard & Poor’s 500 index has recovered about the same time as the economy.
“I’m tilting toward thinking we’re going to have lows in mid-July,” Lee said. “In the meantime, we’re stuck in a range.”
The S&P 500, which fell 37.67, or 4.56 percent, to 789.17 Tuesday, came within 48 points of its 11-year low of 741.02, reached Nov. 21. The Nasdaq composite fell 63.70, or 4.15 percent, to close at 1,470.66.
Wall Street is waiting for more specifics from the government on its various efforts to better assess when to expect growth again.
“The government has their hand on the tiller. They’re steering,” said Henry Herr mann, chief executive at investment-management firm Waddell & Reed. “And that’s the problem — the markets are not confident the proper course has been set yet.”
