Stocks sink as global economic worries rise
NEW YORK -- Lowered expectations for the global economy are giving investors more to be wary about.
The major stock indexes retreated more than 2% Monday after the World Bank added to the market's growing economic worries.
The multilateral lender predicted the world economy will shrink 2.9% in 2009. That estimate was worse than its previous forecast for a 1.7% decline.
Deteriorating hopes for a quick economic recovery also weighed on the prices of oil, metals, and other commodities. Those commodity price drops in turn sent energy and metal producers' shares falling.
Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners, said stock investors want to see stability in commodity prices — not a surge or a tumble.
A sharp rise in commodity prices hurts consumers, while a sharp drop is sign of weak demand around the world.
"You need a balancing act within the commodity markets," Cardillo said.
The stock market is coming off its first weekly loss in more than a month after mixed economic readings last week.
No major economic reports are due Monday, but in the coming days traders will get data on new and existing home sales, durable goods orders, gross domestic product and personal incomes and spending.
The Federal Reserve will be in the spotlight when its two-day meeting on monetary policy finishes Wednesday. The central bank is expected to hold its key rate steady near zero, but investors want to know whether policymakers will buy more Treasurys than they initially planned.
The Fed has been buying government debt at the same time the Treasury Department has been issuing record amounts of that debt. The Treasury is planning to auction $104 billion in debt this week.
Most economic readings over the past few months have indicated the economy is still sliding, but at a slowing pace.
Last week, the Dow fell 3%, the S&P 500 index dropped 2.6% and the Nasdaq composite lost 1.7%.
The Dow remains up 30.4% from the 12-year lows it reached in early March, but has fallen in four of the last five trading days.
