Dow Jones drop 280 points as US recovery is weaker

08:25, June 02, 2011      

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The teetering recovery and worsening federal debts are causing investors to flee Wall Street as the Dow Jones industrial average tumbled 280 points on the first trading day of June.

The dismal start for the summer month is a reflection of growing investors' jitters on whether US economy is facing the headwinds of mounting debt woes and slumping confidence of the consumers who choose to snap shut their wallets.

The Dow Jones industrial average dropped 279.65 points, or 2.2 percent, to 12,290.14. The deep drop erased more than a quarter of the stock market's gains for the year. It was the biggest point drop since June 4 of last year. The S&P index lost 30.65, or 2.3 percent, to 1,314.55. The Nasdaq composite fell 66.11, or 2.3 percent, to 2,769.19.

A recent double-dip in the US housing prices, after the one following the 2008-09 sub-prime mortgage crisis, are dampening the hopes of many in the US who have believed the world's largest economy has bid a farewell to the Great Recession.

Analysts say that so long the prices of properties keeps dropping, it will continue to crimp consumers' confidence to spend as they feel less wealthy. The US economy grew up at a lukewarm 1.8 percent in the first quarter this year, sharply lower than most economists' expectation of at least 2.5 percent.

JP Morgan was among a handful of investment banks that revised down its estimate for GDP growth in the second quarter to 2 percent, from earlier 3 percent.

Doubts about the economy's strength that built in May were compounded by weaker-than-expected reports on American manufacturing and jobs. The Institute for Supply Management's manufacturing index fell to 53.5 in May from 60.4 in April. Private employers added just 38,000 jobs in May. Analysts had expected 180,000 new jobs.

On Wednesday, Wall Street ended a four-day rally with its worst session since last August and could suffer more losses in coming days as investors would possibly face more signs the economic recovery is fading.

By People's Daily Online
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