Wall Street’s slump deepened Wednesday, as interest-rate concerns continued to drive the stock market’s October weakness.
The Dow Jones industrial average fell 36.26 points, to 10,216.91. The broader Standard & Poor’s 500 index slid for the seventh time in October’s eight trading sessions, declining 7.19, to 1177.68.
In line with what has become a familiar pattern, stocks opened higher but progressively weakened as the day wore on.
And in what may be a sign that investors are growing more cautious, smaller stocks showed a much steeper decline than did the blue chips.
Since the start of October, “we’ve seen a 180-degree reversal in investment strategy,” commented Jack Ablin, chief investment officer at Harris Private Bank.
Before then, he said, the market was rewarding investors who adopted a speculative posture, and this year small-cap stocks have been trading at a substantial premium to large caps.
“But ever since the hawkish Fed talk and the Delphi bankruptcy, we’ve seen an unraveling of speculation,” he said.
As proof, Ablin notes that over the past five sessions the stocks of financially stronger S&P 500 companies have declined just 0.5 percent, while those with the weakest balance sheets have dropped 5.1 percent.
It appears “investors on both the bond and stock side have become convinced the Fed is serious about raising rates” further, he added. As a result, according to Ablin, the nascent shift away from small caps in favor of more substantial stocks is “probably part of a longer-term trend.”
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Indeed, while the Dow declined 0.3 percent Wednesday and the S&P dropped 0.6 percent, the Russell 2000 index of smaller companies slipped 8.51 points, a painful 1.3 percent, to close at 621.57.
The tech-heavy Nasdaq composite index tumbled 23.62 points, or 1.1 percent, to 2037.47, pulled down in part by a Wall Street analyst’s negative comments about the semiconductor group.
Oil prices rose for the second straight day. A report suggesting world oil demand will climb next year helped send the price of crude for November delivery up 59 cents, to $64.12 a barrel, on the New York Mercantile Exchange.
Although Treasury securities generally move in the opposite direction of stocks, that didn’t hold true Wednesday, as bond prices fell along with equities.
A government auction of $13 billion in new five-year notes went well and briefly cheered traders, but worries about further Fed hikes eventually sent the benchmark 10-year note down a substantial 13/32, for a yield of 4.45 percent.
Among stocks in the news:
Krispy Kreme Doughnuts tumbled 13 percent, to a new 52-week low of $4.88. Less than two years ago, the concern’s shares were trading above $40, but the company has encountered a host of financial problems and is now the subject of bankruptcy rumors.
Shares of Tribune Co., which owns this newspaper, and Gannett Co. declined to new 52-week lows, after industry analysts lowered their stocks from a favorable rating to neutral readings.
JPMorgan downgraded Chicago-based Tribune, which fell 2.7 percent, to $31.81–its lowest level since fall 2001.
Saying “the chance of further disappointment to growth is much more likely than an upside surprise,” Deutsche Bank downgraded McLean, Va.-based Gannett, helping send its shares down 2.3 percent, to $64.67.
Wall Street has grown increasingly bearish about the publishing sector, which faces pressure from Internet competition, a soft advertising market and rising newsprint costs.
Local action: Navistar shares dropped for the third consecutive day, declining 4.2 percent, to a new 52-week low of $26.67. UBS analyst David Bleustein, citing a published report that said the Warrenville-based truckmaker plans to reduce medium-truck production by more than 30 percent in response to softening industry conditions, lowered his price target for Navistar by $3, to $32. Navistar shares have declined 12 percent this week.
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