This past Wednesday marked a significant fall of the Euro, setting stocks on the down swing, with the Dow Jones industrial closing below 10,000 for the first time in nearly four months. Wednesday’s trading extended a streak of volatility since stocks went to their highest level of the year in late April.
“We had a nice rally all day and we expected it to have had legs,” said Phillip Orlando, chief equity market strategist at Federated Investors in New York, which manages about $400 billion. The sudden sell-off, he said, suggests “that investors are as nervous as a long-tailed cat in a roomful of rocking chairs.”
Analysts theorize that the late reversal emphasizes the reservation with which traders treat Europe, worrying that heavy debt loads in European countries and more rounds of cost-cutting will hamper a recovery there in addition to spreading to other regions.
The sliding euro has come to symbolize the waning confidence in Europe’s ability to control or contain its debt problems. Currently, the euro remains close to the four-year low it hit last week, falling to $1.2179 Wednesday.
“The inability of the market to hang on to the early gains today certainly does not send a very positive message,” said Teddy Weisberg, a New York Stock Exchange floor trader with Seaport Securities. “It’s a function of there being no confidence among investors.”
The afternoon stock slump stood in stark contrast to Tuesday, when traders chipped away at a steep slide by the close and the major indexes ended little changed. The slide in stocks has rattled investors still shaken by the market’s plunge in late 2008 and early 2009.
“Everyone is so scared from what happened back in the big crash and now they’re just all gun-shy,” said Frank Ingarra, co-portfolio manager at Hennessy Funds.
Stocks were higher for most of the day after traders focused on economic news. While the American economy chugs towards a slow recovery, Europe is beginning to lose its economic strength.
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