NEW YORK — Stocks and interest rates fell sharply Wed nesday as more bad news chipped away at investors’ view of the economy.
The Dow Jones industrial average fell 265 points, and all the major indexes fell more than 2 percent and are now showing losses for the year. The Dow has fallen four days out of five, and it has lost almost 320 points in the past two days. Meanwhile, the yield on the Treasury’s 10- year note fell to its lowest level since March 2009 as investors avoided stocks and sought the safety of government securities.
Only 442 stocks rose on the New York Stock Exchange while 2,627 fell, a sign that investors expect all businesses to suffer if the economy continues to weaken.
Investors’ gloom deepened a day after the Federal Reserve said it would begin buying government bonds to stimulate the economy. News of slower industrial growth in China and a disappointing economic indicator in Japan helped send stocks plunging first in Asia, then in Europe.
The economic news in the U.S. was also troubling. The Commerce Department said the trade deficit widened in June to its highest level in 20 months as exports dipped. Falling exports mean U.S. manufacturing could be slowing down. And early this year, manufacturing showed the most consistent signs of recovery.
Investors got more bad news after trading ended. Cisco Systems’ revenue in the company’s latest quarter fell short of analysts’ expectations. Companies’ revenue shortfalls have sent stocks falling over the past month, and Cisco’s stock slid 8 percent in after-hours trading. Other stocks fell as well, and the report was likely to touch off more selling across the market today.
The Dow dropped 265.42, or 2.5 percent, to 10,378.83, its largest slide since it fell 268.22 June 29. The Standard & Poor’s 500 fell 31.59, or 2.8 percent, to 1,089.47.
The Nasdaq composite fell 68.54, or 3 percent, to 2,208.63. The Nasdaq tends to have the biggest losses when stocks are falling sharply because many of its component companies are smaller businesses that struggle the most in a weak economy.
Stock traders tend to buy and sell based on their expectations for what business will be like in six to nine months. The problem is that economic data have been so muddled lately that investors have no sense of whether the recovery will hold. In its economic assessment statement Tuesday, the Fed was still talking about a recovery, although the central bank said it would be more modest than forecast in June.
“Uncertainty, uncertainty, uncertainty,” was how Javier Perez-Santalla, managing director for futures and foreign exchange at the institutional brokerage firm Dinosaur Group, described the mood in the market.
“Everyone is scratching their heads, saying ‘Which way?’ ” Perez-Santalla said. “We’re kind of stuck in this no man’s land.”
