Wall Street Skids As Global Recession Worries Resurface

Wall Street limped into Friday’s close with substantial losses when soft economic data from China and the European Union rekindled fears of slower economic growth and unleashed a meltdown in the US. The Dow closed at its lowest level since May, bottoming out at 24,000 for a loss of nearly 500 points from the prior day’s close. Led by losses in all eleven sectors with healthcare and energy taking the brunt, the S&P 500 re-entered correction territory and traded below 2,600 for only the second time in seven months.

The three major indices were all in the red for a second consecutive week with the Dow lower by 1.2%, the S&P 500 down 1.3% from last Friday’s close and the Nasdaq down 0.8%.

Selling erupted overnight after Chinese retail sales had its worse monthly gain in 15 years and Europe’s private sector slowed from the month prior. Amid fears that slower global growth will spill into the US, investors bailed out of risk assets and into safe havens, initially driving down the yield on the 10-year note to 2.87% and narrowing the 2/10 spread back to just 14 basis points.

US economic data failed to put a dent in the negative price action even with November retail sales coming out ahead of expectations, and industrial production and capacity utilization comfortably above estimates.

Selling pressure gained momentum after the European close, exacerbated by panic selling in Johnson & Johnson (JNJ) that permeated the entire health care sector. JNJ shares fell as much as 12% after Reuters claimed the company knew about asbestos in its baby powder since the early 70s.

Energy shares were also against the ropes as oversupply issues drove Brent crude futures back to $60 per barrel, driving the energy complex into bear market territory.