MARKETS - Credit fears keep bears in charge - The Dow plunges again despite good economic news. Oil nears a record high. Some analysts see more volatility ahead.
After the stock market's worst week in years, you may be happy to have reached the weekend. But should you be dreading next week?
Share prices sank for a second day Friday as worries persisted that a sharp tightening of high-risk corporate credit would derail stock-boosting buyouts and perhaps even hamper business activity.
The market staged a feeble rally early in the day after the government reported that U.S. economic growth accelerated to a 3.4% annual pace last quarter from 0.6% in the first quarter, even though housing woes appeared to suppress consumer spending for the first time.
Despite the slightly better-than-expected overall report, bearishness quickly took hold of the market and the major equity indexes turned down, falling especially sharply in the final 30 minutes of trading.
A day after it shed more than 311 points, the Dow Jones industrial average closed down 208.10 points, or 1.5%, at 13,265.47. Other major indexes also lost ground, with the Nasdaq composite dropping 37.10 points, or 1.4%, to 2,562.24, and the Standard & Poor's 500 falling 23.71 points, or 1.6%, to 1,458.95.
The pullback Thursday and Friday wiped out $526.1 billion in shareholder wealth from stocks in the S&P 500.
The market's inability to hold its gain amid positive news underscored the pessimistic mind-set that has taken hold on Wall Street.
"This is the revulsion phase of a financial mania" in which investors frantically sell stocks, said Hugh Johnson, chief investment officer at Johnson Illington Advisors in Albany, N.Y.
Indeed, Friday's slide highlighted a recent disconnect: The market is tanking even as the economy is growing. That partly reflects the fact that the recent economic growth was largely expected and theoretically already taken into account by stock investors.
In addition, the market's tumble this week stemmed largely from fears that the boom in private equity buyouts, which has helped propel the market rally this year, is at or near its end. But several analysts predict that stocks will bounce back next week as the selling wanes and investors pick through the wreckage.
"You don't tend to go straight up and then straight down," said Liz Ann Sonders, chief investment strategist at Charles Schwab Corp. "You don't tend to go from all-time highs to a new bear market."
But other market professionals said stocks might not stabilize until the fall.
