The largest U.S. bank has the biggest loss since July 22 in the Goldman Sachs index. Hedge funds sold more than 13.2 million shares in the second quarter, filings compiled by Bloomberg show.
Economists estimate U.S. GDP will rise 1.8 percent in 2011, down from forecasts of 3.2 percent the month before margin debt peaked, according to the median projection of respondents in a Bloomberg survey. The country expanded at a 3 percent rate in 2010, Commerce Department data show. The Fed damped its forecast on Aug. 9, saying disruptions caused by Japan's earthquake and tsunami did not account for all of the slowdown.
Stocks have lost about 35 percent in bear markets since 1966 with the average decline lasting about 413 days, according to data compiled by Birinyi and Bloomberg. The worst bear market since the Great Depression was the 2008 crisis. The last U.S. recession began in December 2007 and lasted through June 2009. The S&P 500 is down 14 percent since April 29.
"In environments like this not only do investors pull in, but also lenders get skittish as well," Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., said in an Aug. 11 telephone interview. His firm oversees about $350 billion. "We will come back from this, but it's not entirely clear that this is over yet. The amount of investor discomfort has not been large enough to cause raw fear yet. It doesn't feel like the weaker hands have been cleared out."