By Jason Simpkins
High oil prices, a steep drop in consumer confidence, declining home values and a weak dollar conspired to drive the Dow Jones Industrial Average to its lowest point in two years, and made for the benchmark index's worst June since the Great Depression.
After falling more than 300 points last Thursday and extending losses on Friday, the Dow lost 4.2% in the week ended closing at 11,346.51 – its lowest level since September 2006. All totaled, the Dow plunged 9.5% in June – its worst mid-year performance since the 18% drop in the 1930s.
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Down 20% from its Oct. 9 high of 14,165, the Dow officially entered into a bear market.
"With oil prices bursting through the $140 threshold and seemingly unstoppable, economists are busily debating whether it's all going to end in fire (inflation), or ice (deep recession)," said Doug Porter, senior economist at BMO Capital Markets.
"Equity markets aren't so concerned about the fineries of the debate, but are instead much more focused on the 'it's all going to end' portion of the discussion," he wrote in a note seen by Dow Jones newswire.
All 30 companies listed in the Dow Jones index suffered losses last month, as investors headed for the hills.
The Standard & Poor's 500 index didn't fair much better. It fell 8.4% in June, as just two of the index's 10 industries rose this year. Energy producers gained 6.3% and a group of mining and chemical companies added 0.5%. Earnings at S&P 500 companies dropped 18% on average in the first quarter, Bloomberg News reported.
Unemployment hit 5.5% in May – a 0.5% increase from April and the largest monthly increase in 23 years. Meanwhile, the Conference Board said its overall monthly index tumbled to 50.4 this month (its lowest point since hitting 47.3 in February 1992) as home values continued to plummet and foreclosures rose to record highs.
Another factor was the unrelenting price of oil, which hit another record high above $143 a barrel yesterday (Monday), racked nearly every major market index, foreign and domestic.
Foreign Markets Feel the Pain
China's benchmark CSI 300 Index fell 0.9% yesterday to close at 2,791.82. The index lost 23% of its value in June, its worst monthly performance since the measure was introduced in April 2005. Fourteen stocks fell for every 13 that rose, with six of 10 industry groups declining, Bloomberg reported.
The CSI 300 has declined 48% this year, the most among benchmark indexes in the world's 20 biggest equity markets.
, falling for an eighth straight day, its longest losing streak since last November. The benchmark fell 11.9% in the first half of this year, the worst since 1995 when it lost 26%, according to Reuters.
Britain's FTSE 100 index climbed 1.7 % yesterday but still slipped 7% in June and 13% in the first six months of the year.
News and Related Story Links:
- Money Morning:
Crude Hits Another Record High Above $140