Stocks plunged Tuesday in early trading, as the Dow Jones industrial average fell below the 11,000 mark, on concerns over European sovereign debt and fears that the economy is headed into a recession.
The Dow was down 301.75, or 2.68%, to 10,938.51 at 10:47 a.m. EDT Tuesday, while the S&P 500 was down 33.63, or 2.86%, to 1,140.34.
The U.S. stock market was closed Monday for the Labor Day holiday, as global equities fell, Italian bonds dropped for an 11th day and the cost of government and bank default insurance rose to records amid concern about Europe’s debt crisis.
HSBC Holdings cut its forecast for global economic growth for the next two years and said the efficacy of any further stimulus measures will be limited.
The world economy will grow 2.6% this year and 2.8% in 2012, compared with estimates published in June of 3% and 3.4% respectively, London-based HSBC economists including Stephen King and Madhur Jha said in an e-mail to clients Tuesday. HSBC also lowered its euro-area and U.S. growth predictions, with the latter at “stall speed,” the economists said.
“Healthy economic recovery is now but a distant dream,” they wrote. “For the developed world, the downgrades are particularly aggressive whereas, for the emerging world, the reductions are more modest, helped by the ongoing support offered by China and India.”
The S&P 500 plunged 2.5% on Sept. 2, wiping out a weekly advance, as a government report showing employment growth stagnated, which stoked concern the economy may fall into a recession. The index slid as much as 18% from a three-year high on April 29 and sank 5.7% in August, the biggest monthly drop since May 2010. Stocks trimmed losses at the end of last month as Federal Reserve Chairman Ben S. Bernanke said on Aug. 26 that the central bank has tools to stimulate growth.