The Sweet Smell Of Excess Gets Halted By A Thumping Downturn

Posted by tjdetai on August 5th, 2015

The Dow Jones Industrial Average demonstrated that it must like a challenge: one trading day after the equity market’s most widely watched bellwether finally climbed into positive territory for 2009, it must have decided it liked the experience enough to get into a position to repeat it.

The blue-chip indicator recorded a 187-point, 2% decline, closing the session at 8612, effectively untying the solid effort that lifted the industrial average to 8799 on Friday, the first time it strayed into the black for 2009 since the opening trading days of the new year.Blue chips’ undoing came after a spate of admittedly second-tier economic data worked to fan what had been the embers of some concern about an economic recovery into something resembling an actual flame. True or not - or, more accurately, the start of a trend or just a short-lived bout of second-guessing - the flicker managed to torch what had been the single greatest source of the equity market’s recent success: belief in a global economic recovery.

That analysis had been reflected in rising commodity prices, as the price of basic materials like copper, aluminum and crude moved out to their highs for the year in recent trading. But those very materials went bust on Monday. Copper, for instance, declined so sharply in some markets that it reached daily price-decline limits, halting trading.As a result, Freeport-McMoRan (FCX) fell 6%, the same decline that Southern Copper (PCU). Aluminum giant Alcoa (AA) fell 7%. Dupont (DD) slid 4%.Exxon Mobil (XOM) retreated 2%, ConocoPhilips (COP) gave up 3%, as the price of crude, which traded at a high for 2009 last week, surrendered 2%, falling to a barrel.The market also apparently took some lessons out the decision by Extended Stay Hotelsto file for bankruptcy protection, making it one of the largest commercial real-estate operations to signal that it collapsed because of financing issues.

Worries about the exposure that banks and other asset managers have toward commercial real estate has surfaaced as one of the issues that could supplant the long-standing hesitation about the residential real estate market.Shares of Lincoln National (LNC) eased 11%, after the insurance holding company said it would take less than billion in government rescue funds, and augment the capital with debt and equity offerings to raise a total of .1 billion. Rival insurance concern Hartford Financial Services (HIG) declined 12%.

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