Big Sell-Off as World Bank Downgrades Growth

by devteam June 22nd, 2009 | Share

Investor sentiment began the week with a rapid downward slide after the World Bank released new forecasts severely downgrading the prospects for a global recovery. The world economy remains “unusually uncertain” and is now expected to shrink 2.9% this year, the World Bank said, compared with the -1.7% prediction issued in March.

Markets opened lower and extended losses in the first hour of trading. As of 11:00, the Nasdaq had shed 2.50% to 1781, the S&P 500 had lost 2.12% to 902, and the Dow was down 1.64% to 8399. With this morning’s sell-off, the S&P has now lost all its year-to-date gains.

Meanwhile, the 10-year yield moved down one-tenth to 3.71%, oil prices have fallen below $68 per barrel, and a flight to safety has lifted the U.S. dollar

In global news, riots and protests against the re-election of Mahmoud Ahmedi-Nejad in Iran continued over the weekend and show no signs of dissipating, as a spokesman for Iran’s Guardian Council admitted that in as many as 50 cities, voter turnout exceed 100%. The admission hurts the credibility of Supreme Leader Ayatollah Ali Khamenei, who on Friday said the election was fair.

In the U.S., three more regional banks collapsed, bringing the total number of financial institutions driven to bankruptcy to 40. Georgia’s Southern Community Bank, North Carolina’s Cooperative Bank, and Kansas’s First National Bank of Anthony were all seized by the Federal Deposit Insurance Corporation.

The Obama administration continues its crackdown on offshore tax evasion. The U.S. is asking Switzerland to share financial information, a proposal that may be answered via national referendum.

The Federal Reserve’s two-day monetary policy meeting begins tomorrow.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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