NEW YORK: U.S. stock indexes fell to multi-month lows Wednesday on worries about government budgets and after an Israeli strike in the Gaza Strip increased Wall Street’s anxiety, offsetting gains in the tech sector.
The budget negotiations to avert automatic spending cuts and tax increases set to start in January is “a global economic event, and the eye of the storm is Washington,” said Jim Russell, chief equity strategist for U.S. Bank Wealth Management.
“There is increasing activity between Israel and several other Middle East countries, which is taking oil higher and making markets more jittery, and adding to the markets’ downside volatility,” said Russell.
After rising 41 points and falling 213 points, the Dow Jones industrial average closed at 12,570.95, down 185.23 points, or 1.5 percent. The third day of declines left the index at its lowest close since late June.
Of the Dow’s 30 components, only Cisco Systems Inc. remained in positive turf, up 4.8 percent after the computer-networking-equipment maker “surprised virtually every analyst … by handily beating top- and bottom-line estimates,” Fred Dickson, chief investment strategist at Davidson Cos., wrote in an email.
Also finishing at a four-month low, the S&P 500 index shed 19.04 points, or 1.4 percent, to 1,355.49.
Down more than 10 percent from its September closing high, putting it in correction territory, the Nasdaq composite fell 37.08 points, or 1.3 percent, to 2,846.81, its lowest close in five months.
The price of oil jumped more than 1 percent after an Israeli airstrike killed a Hamas leader in the Gaza Strip, fostering the view that Middle East unrest would dent supply.
Crude futures for December delivery gained 94 cents, or 1.1 percent, to $86.32 a barrel.
President Barack Obama on Wednesday met with corporate executives including Jeffrey Immelt, chief executive of General Electric Co.
“Every investor now is a cliff watcher. The focus here is not on earnings, the Federal Reserve or oil prices; it’s all about the fiscal cliff,” said Alan Skrainka, chief investment officer at Cornerstone Wealth Management.
“So let’s hope we see some progress on the negotiations front; until then we’re seeing a modest correction, justified by the uncertainties in Washington,” Skrainka added.
Minutes from the last Federal Open Market Committee gathering show a number of Federal Reserve officials thought the central bank might have to broaden its monthly bond purchases in 2013.
“Our base case scenario is for $20 [billion] to $30 billion in extra purchases starting in the new year. Most economists expect something additional to be announced, so this headline is not new news,” said Dan Greenhaus, chief global strategist at BTIG LLC.
U.S. retail sales declined in October for the first time in four months, impacted by Superstorm Sandy.