US Stock market jitters

NEW YORK (AP):

There are concerns in the United States that the stock market is starting to feed economic fear, not just reflect it.

Stocks have fallen four weeks in a row. Some on Wall Street worry that the resulting blow to confidence, not to mention 401(k) statements, has set off a spiral of fear that could push prices even lower, cause people and businesses to pull back and tip the economy into a new recession.

"I'm nervous that fear will lead companies to stop hiring and people to stop spending," says Jim Paulsen, chief investment strategist of Wells Capital Management, famous for his usually bullish take on the markets.

A home sales report this past week showed that more sales than usual fell apart at the last minute, which suggests plunging stocks and dismal economic news gave buyers cold feet. At least 16 per cent of deals were cancelled ahead of closings last month, four times the rate in May.

Beth Ann Bovino, senior eco-nomist at Standard & Poor's, says another big plunge in stocks could "push us closer to the brink."

The Standard & Poor's 500 stock index ended last Friday down five per cent for the week. The average is down 16 per cent during the four-week losing streak. One reason for the drop is fear that another recession, if not certain, is more likely now.

Economic weakness

The run of bad economic news started last month when the government said the economy grew much more weakly in the first half of this year than thought. Growth, at an annual rate of 0.8 per cent, was the slowest since the Great Recession ended in June 2009.

The economic weakness has made investors more likely to sell stocks at the first hint that things are getting worse. And last week, they got signs aplenty.