(Bloomberg News) U.S. stocks declined, leaving the Standard & Poor's 500 Index poised to enter a bear market, as Europe's policy makers struggled to reassure investors they can contain the region's debt crisis.
Stocks pared losses after Federal Reserve Chairman Ben S. Bernanke said the central bank stands ready to take more steps to boost growth. Caterpillar Inc. and Dow Chemical Co. fell at least 2.1 percent to pace declines in companies most-tied to economic growth. Citigroup Inc. and Bank of America Corp. lost more than 5 percent following declines in European banks.
The S&P 500 slid 1.4 percent to 1,084.15 at 10:23 a.m. New York time, after falling as much as 2.2 percent. The index is down more than 20 percent from a three-year high in April, the threshold for a bear market. The Dow Jones Industrial Average dropped 195.26 points, or 1.8 percent, to 10,460.04 today.
"The bears seem to have the upper hand right now," Madelynn Matlock, who helps oversee about $14.8 billion at Huntington Asset Advisors in Cincinnati, said in a telephone interview. "There's more fear than interest in taking opportunity from the low valuations. The path of least resistance is in the downward direction."
Investors who bought S&P 500 shares three years ago and held on to the stocks have made no profit. The gauge closed at 1,099.23 yesterday, the same closing level as on Oct. 3, 2008, and the benchmark measure's lowest close since Sept. 8, 2010. The index would complete a 20 percent decline from its April 29 high by closing below 1,090.88 today.
Concern governments may be running out of tools to keep the global economic slowdown from worsening has left equities from Sao Paolo to Hong Kong and Frankfurt in bear markets. The declines have confounded bullish investors who speculated the recovery that began in March 2009 would boost stocks for a third year.
Goldman Sachs Group Inc. cut its global growth forecast for this year and next, predicting recessions in Germany and France as the European economy stalls and the risk of contraction in the U.S. grows. The world economy will probably expand 3.8 percent this year and 3.5 percent in 2012, compared with earlier predictions of 3.9 percent for 2011 and 4.2 percent for next year, Goldman Sachs economists Jan Hatzius and Dominic Wilson wrote in an Oct. 3 report.
The Fed "will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in a context of price stability," Bernanke said today in testimony to Congress's Joint Economic Committee in Washington. The remarks signal Bernanke may not be finished after attempts in August and September to strengthen record monetary stimulus with unconventional tools.
Orders for U.S. capital equipment increased in August by the most in three months, a sign business investment and exports held up in the face of mounting concern over the European debt crisis. Bookings for goods like computers and communications gear, excluding military hardware and aircraft, climbed 0.9 percent, a Commerce Department report showed. Demand for all factory goods declined 0.2 percent.
Global stocks fell earlier after Luxembourg Prime Minister Jean-Claude Juncker said European finance chiefs meeting yesterday considered "technical revisions" for a second Greek bailout, fueling concern bondholders may have to take bigger losses on the nation's debt.