Colorado stocks took a thumping for the second trading day in a row as investors questioned the ability of consumer spending to fuel a recovery and backed away from commodity producers.
The Bloomberg Colorado Index, a basket of stocks based in the state, fell 2.7 percent Monday and is down 4.2 percent since Thursday’s close.
Sharp drops in commodity producers Whiting Petroleum, Newmont Mining and Intrepid Potash drove much of the decline. Of the stocks in the local index, 75 declined in value Monday, 14 rose and seven remain unchanged.
The Standard & Poor’s 500 fell back under 1,000 to 979.7 on Monday, a decline of 2.4 percent on the day. The Dow Jones industrial average dropped 186.06 points, or 2 percent, to 9,135.34 and the Nasdaq composite index fell 2.8 percent to 1,930.84.
“The profit-taking was expected,” said Christine DeRose, a financial consultant with RBC Wealth Management in Denver. “We ran pretty far, pretty quick.”
Through Thursday, the S&P 500 was up 50 percent from its low on March 9. The Bloomberg Colorado Index was up 73.4 percent over the same period.
DeRose said investors may be losing confidence that consumer spending, which accounts for about 70 percent of U.S. economic activity, will pick up enough to fuel a sustained recovery.
Retail sales haven’t increased since February, she said. And a report by home-improvement retailer Lowe’s on Monday that second- quarter profit fell 19 percent didn’t help sentiment.
Also, consumer debt remains high, and bankers told the Federal Reserve that they expect lending standards to remain tight far into 2010.
Sam Jones, president of All Season Financial Advisors in Denver, predicts stocks could be setting up for a “messy” period of declines through September before rallying at year-end.
“This correction is likely to raise some eyebrows, but it could very well prove to be just the first hard down leg in a period of new and higher price volatility that extends for the remainder of the third quarter,” he told clients.
Investors suffered huge declines last September after Lehman Brothers folded and the government took over insurance giant AIG.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
