U.S. stocks fall sharply

U.S. stocks fell sharply Friday, a day after the market broke its longest losing streak in more than a year.

Unless shares recover sharply, they are on track for their sixth straight weekly loss — the longest losing streak since the fall of 2002. The market’s last seven-week stretch of losses began in May 2001, as the dot-com bubble deflated.

Stocks have suffered this month after a raft of weak economic news dampened hopes for a speedy economic recovery. Traders fear that weaker hiring, industrial output, and a moribund housing market are reversing a bull market that has lifted the Dow Jones industrial average by 20 percent over the past year.

The Dow is down 5 percent since June began.

Shares bounced back Thursday after a report that U.S. exports unexpectedly hit a record in April. The gains appear to have been short-lived.

In early trading, the Dow skidded 120 points, or 1 percent, to 12,004. The Standard & Poor’s 500 index dropped 13, or 1 percent, to 1,276. The Nasdaq composite index fell 22, or 0.8 percent, to 2,662. The losses were broad, with declines for all 10 of the S&P 500’s industry groups. All 30 components of the Dow also fell.

“The market doesn’t go up indefinitely; it’s not a straight line and it does get choppy at times,” said Karyn Cavanaugh, vice president and market strategist with ING Investment Management. But Cavanaugh said stronger-than-expected corporate suggest the market will resume its upward climb.

“The clearest signal that we’re in a bull market is our incredible run in corporate profits” over the past seven quarters, she said.

Cavanaugh said strong demand from faster-growing economies overseas is offsetting weak consumer spending in the U.S. Consumers account for about 70 percent of U.S. economic activity.
However, a smaller than anticipated Chinese trade surplus in May and a bigger than anticipated decline in British industrial production in April fueled fears that growth is overseas, not just in the U.S.
Asian markets were mixed overnight after the report showing weak imports to China suggested that demand might decrease for commodities such as oil and iron ore. Japan’s Nikkei 224 index rose, while key indexes in Hong Kong and Korea fell. Shanghai’s main index edged up.

Exports from China decreased in May and indicators of industrial activity there continued to weaken. Economists fear that Beijing’s efforts to temper rapid growth with lending and investing curbs might cool growth too quickly.

Weakness in China could hurt the volatile global commodities trade if it cuts into demand for oil, iron ore and other industrial inputs for which China is a key customer.

China’s mixed trade report followed surprisingly strong data for U.S. trade that helped lift stocks on Thursday. The government said on Thursday that U.S. exports hit a record in April.

Trade factors into the government’s broad calculation of economic growth, known as gross domestic product.

The euro fell off recent highs amid signs that European policymakers have reached an impasse over how to handle Greece’s drawn-out debt crisis.

Investors responded to Thursday’s market upswing by returning to higher-risk equities, pushing the yield on the 10-year Treasury note above 3 percent. By early Friday, economic jitters had returned. The yield fell to 2.96 percent. Bond yields fall as bond prices rise.