U.S. stock market declines as Egyptian unrest continues
Saturday, January 29, 2011; 12:41 AM
U.S. stocks declined sharply Friday as violent clashes in Egypt injected a jolt of anxiety into global financial markets.
The Standard & Poor's 500-stock index fell 1.8 percent to close at 1276.34, while the Dow Jones industrial average slid 1.4 percent to 11,823.70. The declines on Wall Street followed comparable losses in Asian and European markets.
Scenes of demonstrators challenging the government of Egypt, a strategic ally of the United States in the volatile Middle East, helped send oil prices 4.3 percent higher.
In a flight to safety, investors increased their purchases of U.S. Treasurys, pushing the yield on 10-year bonds down to 3.33 percent from 3.38 percent a day earlier. The price of bonds rises as the yield falls.
The stock market's retreat came as the Dow was on the verge of closing above 12,000 for the first time since June 2008. The Dow traded repeatedly above 12,000 earlier in the week only to fall short at the closing bell.
Egypt is central to U.S. interests in the Middle East as a moderate state and a key player in both counterterrorism operations and regional peace negotiations, said Helima L. Croft, a geopolitical analyst at Barclays Capital.
If street protests were to end President Hosni Mubarak's nearly 30-year hold on power, "I think there would be a fear that you could see radicalism sweeping across the Middle East," Croft said, adding that the fear might be unfounded.
Beyond its political significance, Egypt controls the Suez Canal, an important shipping lane.
Overseas, London's FTSE 100-stock index fell 1.4 percent Friday and Germany's DAX index fell 0.7 percent.
Daniel J. Cook, chief executive of IG Markets, said the stock market was gripped with uncertainty about the Egyptian upheaval, and often under such circumstances "the mentality is just take the profits that you've got" and sell.
Weeks ago, a flare-up of tensions on the Korean Peninsula caused a similar market shock, but that quickly faded, Cook noted.
New information about the U.S. economy also gave investors pause Friday. Economic growth sped up in the last three months of 2010, returning to its pre-recession level, the Commerce Department reported. But the 3.2 percent annual growth rate fell short of Wall Street expectations; analysts surveyed by Bloomberg had expected the economy to have grown at a rate of 3.5 percent.