Recession looming back again

Posted By on June 16, 2011

U.S. stocks sank the most in two weeks, almost erasing the 2011 gain for the Standard & Poor’s 500 Index, and the euro slid the most in more than a month amid rising concern that Greece will default and evidence that the American economy is slowing. Treasuries rallied.

The S&P 500 fell 1.7 percent to a three-month low of 1,265.42 at 4 p.m. in New York, trimming its year-to-date gain to 0.6 percent, and the Stoxx Europe 600 Index closed down 1.1 percent. The euro lost 1.9 percent to $1.4166 and the cost of insuring Greek and Portuguese debt climbed to records. Oil sank to the lowest price since February as the S&P GSCI Index of commodities plunged 3.4 percent. The Dollar Index surged the most in 10 months, 10-year Treasury yields fell below 3 percent and two-year rates dropped the most since April.

Stocks and the euro extended losses amid concern Greek Prime Minister George Papandreou will be forced out of office amid escalating protests over budget cuts, fueling speculation that the austerity measures needed to qualify for international aid will be put in jeopardy. A report that Ireland’s finance minister wants bondholders to share the burden of bailing out the nation’s banks also weighed on markets. The S&P 500 erased a two-day gain as economic reports spurred concern growth is slowing as inflation picks up.

“The euro is getting killed because the risk trade is off as people run to the dollar and Treasuries,” said Donald Selkin, New York-based chief market strategist at National Securities Corp., which manages $3 billion. “It’s going to be a tough summer. We’re seeing slowing economic growth and a little higher inflation, that’s not a good combination.” […read more]