Breaking News Emails
Stocks ended their climb to record highs on Wednesday, with the Dow in a triple-digit drop, after the World Bank lowered its outlook for global growth and a shock election defeat of the House majority leader raised fear of gridlock in Washington.
The Dow Jones Industrial Average, which hit a record high on Tuesday, suffered its worst hit in three weeks to close unofficially 102 points down. The S&P 500, too, retreated from record highs and lost 6 points and the Nasdaq also dropped 6 points.
"The World Bank cut the global-growth rate a bit. If the market needs an excuse to move lower because it's overbought, let's pin it on that. The market was probably due for a pause anyway regardless of that revision," said Jim Russell, senior equity strategist for US Bank Wealth Management.
"Technicians would tell you we're in an overbought situation right now. It does not mean we have to decline significantly, but more cautious strategists would point out that we've gone 32 months without a decline of 10 percent or more, and the average is 18 months since World War II. We've gone a lot longer than we normally go," said Sam Stovall, managing director, U.S. equity strategy at S&P Capital IQ.
House Majority Leader Eric Cantor's surprising loss to a tea party activist in Tuesday's Virginia primary also rattled investors, with some wondering if it heralded the return of gridlock on Capitol Hill.
"I hope it doesn't mean that it will be impossible from this point forward to compromise on issues like the budget, immigration policy," Goldman Sachs Group CEO Lloyd Blankfein said in a televised interview on CNBC.
In its report, the World Bank projected the global economy would expand 2.8 percent in 2014, down from a 3.2 percent forecast delivered in January. Its estimate for world growth in 2015 held at 3.4 percent.
"We are not totally out of the woods yet," Kaushik Basu, the bank's senior vice president and chief economist, said in a news release.
Boeing shares dropped 2.3 percent after RBC Capital downgraded the planemaker's stock. And, a Guggenheim Securities analyst said Boeing was the "biggest loser" besides Cantor, because the Republican's defeat jeopardizes congressional reauthorization of low-cost lending that helps foreign carriers purchase jets.
The dollar edged lower against the currencies of major U.S. trading partners and the 10-year Treasury note yield used in figuring mortgage rates and other consumer loans fell a basis point to 2.638 percent.