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Commodities take a big hit as investors shift to selling mode

Fresh doubts about the global economy send gold futures down 3%. Corn, wheat, oil, cotton and copper also drop sharply. Stocks are punished too, with the Dow losing about 135 points.

November 18, 2011|By Tom Petruno, Los Angeles Times

Raise cash, head for the sidelines.

That was the guiding sentiment in stock and commodity markets Thursday as some investors and traders sold what they could and looked for a hiding place amid fresh doubts about the global economy.

Commodities took the heaviest hit: Gold futures dived $54, or 3%, to $1,719.80 an ounce in New York, the biggest one-day drop since Sept. 23.

The Thomson Reuters/Jefferies CRB index of 19 commodities slumped 2.5%, the biggest decline since Sept. 30. Corn, wheat, oil, cotton and copper all were sharply lower.

"There is liquidation across the board," said Frank Cholly Sr., a senior commodities broker at RJO Futures in Chicago.

On Wall Street, stocks ended broadly lower for a second consecutive day. The Dow Jones industrial average, which tumbled 190 points Wednesday, fell 134.86 points, or 1.1%, to 11,770.73. That cut the index's year-to-date gain to 1.7%.

Broader indexes were weaker. The Standard & Poor's 500 fell 1.7%; the Nasdaq composite lost 2%.

Some investors ran back to U.S. Treasury bonds, pushing the yield on the 10-year T-note down to 1.96% from 2% on Wednesday.

Many traders blamed continuing fears that Europe is headed for a major blowup as its debt crisis worsens. Spain and France sold new bonds and were forced to pay yields far above the levels of a month ago.

General Motors Co. Chief Executive Dan Akerson told the Detroit Economic Club that the European crisis is "much more serious" than the 2008 bursting of the credit bubble. GM shares fell 86 cents, or 3.8%, to $21.79, a six-week low.

Still, Europe wasn't a complete disaster Thursday: Italian bond yields pulled back from recent highs. And European stock markets were mostly down 1% to 1.5%, relatively modest declines compared with the worst days of the last few months.

Meanwhile, markets seemingly ignored upbeat U.S. economic data, including a drop in new claims for jobless benefits to the lowest level since early April.

As they did in late September, some investors and traders may just be cashing out of whatever is easiest to sell. That would include U.S. blue-chip stocks. The Dow is down 3.2% since Friday.

With so much uncertainty about Europe, and with the U.S. congressional deficit-cutting panel facing a Nov. 23 deadline to come up with a plan, some market players may just be calling it quits on 2011 early.

"I think it's, 'Just get out of things and wait till next year,' " said Frank Lesh, futures analyst at FuturePath Trading in Chicago.

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