Stock Market Falls — Again

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MELISSA BLOCK, host:

It was another bad day for the stock market. The Dow lost 172 points today. It finished below 12,000 for the first time since March. And that loss continues a downward trend. This is the sixth week in a row that the Dow has finished the week lower than it began. You'd have to go back to 2002 to find a longer string of consecutive weekly declines.

NPR's Jim Zarroli joins us to talk about this.

Jim, how bad is it?

JIM ZARROLI: Well, I mean, we've certainly seen a lot worse days than this, but it was pretty ugly. A lot of stocks fell. Energy stocks were down because oil prices fell. A lot of bank stocks fell. Travelers, the big insurance company, which is part of the Dow, came out and said there have been so many natural disasters it won't make as much money as it expected, so it fell. A lot of other companies fell.

It's - I mean, it wasn't a bloodbath. It was just the continuation of this long erosion of value that we've been seeing for about six weeks. And as a result, we're back to where we were in January for both the S&P 500 and the Dow.

BLOCK: And, Jim, what's behind that erosion you're talking about? What's causing so many investors to run for cover?

ZARROLI: Well, I think, you know, it's really just that we've had dribs and drabs of bad news for six weeks or so. Really, just look at some of the economic news that has come out lately.

Housing prices have fallen more. They have been a huge drag on economic growth. Industrial output is down, and then there's unemployment. The job market has been, you know, growing for a while, but the growth has never been what you would call strong. And last month, job creation wasn't even really enough to keep pace with the growth in population.

Then this week, the Fed came out and said it wasn't going to do anything new to stimulate the economy. So, you know, a lot of investors are just looking at this and questioning whether this is a market that they want to be in.

BLOCK: And do you think what's happening with the market is really a signal of what's to come?

ZARROLI: Well, I think that's what a lot of investors are worried about. I think, until earlier this year, you know, a lot of investors were thinking, you know, growth is slow, but the trajectory is higher. And if you park your money in stocks, you do pretty well.

Clearly, they're reassessing that now. You know, of course, the stock market has always had a way of anticipating downturns that don't quite happen and maybe that just within a few months this will all be, you know, a distant memory.

A lot of big U.S. companies are still in very good shape. They have a lot of cash on their balance sheets. They're making money. But I think on the whole, a lot of investors are just looking in, you know, everything that's happened, everything that's come out lately, and they're just, you know, having second thoughts about how good investment stocks are right now.

BLOCK: And, Jim, if people are not parking their money in stocks, as you say, where are they parking it?

ZARROLI: Well, that's a good question. I mean, you could invest overseas, you know, but Europe has troubles of its own with the debt crisis. There's evidence that Asian markets are slowing a bit. Countries like China are having big concerns about inflation, so they've been putting the brakes on growth, which means China is no longer the growth engine it was, although it's still growing at a rate that, you know, we can only envy.

One place people are putting their money continues to be U.S. government debt. It's a safe haven in difficult times. We hear a lot, you know, we hear so much now about how much the U.S. borrows. There's controversy over the debt ceiling. But at least, for now, investors are willing to lend the United States money, and interest rates are a little lower today than they were.

BLOCK: OK. NPR business correspondent Jim Zarroli.

Jim, thanks very much.

ZARROLI: You're welcome.

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