Stocks plunge again to finish worst quarter since 2008

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The reality of a debt-heavy global economy stuck in low gear hit home in the last three months, driving U.S. stocks to their worst quarterly loss since the 2008 financial crisis.

On Friday, share prices ended mostly lower around the globe, heaping more misery on equity investors battered by growing doubts about the economic outlook. The Dow Jones industrial average slumped 240.60 points, or 2.2%, to close the quarter at 10,913.38.

The 30-stock Dow lost 12.1% in the three months. And that was pretty much the good news: The biggest stocks held up much better than the rest of the market.

The broader Standard & Poor’s 500 index, a benchmark for many 401(k) retirement accounts, fell 2.5% on Friday and 14.3% for the quarter. It was the biggest decline since the index crashed 22.6% in the fourth quarter of 2008.

Market losses generally were worse overseas, particularly in Europe, as the continent’s government-debt crisis raged on. The average European blue-chip stock tumbled 17.4% for the three months. The Hong Kong market plunged 21.5% and Brazilian shares lost 16.2%.

And in another blow to investor confidence, the asset many people had viewed as a haven -- gold -- was pummeled in the final few weeks of the quarter amid a steep decline in commodities in general. The yellow metal slid from nearly $1,900 an ounce in late August to end Friday at $1,620.

As commodities fell further on Friday, U.S. crude oil dropped $2.94 to $79.20 a barrel, a new 52-week low. That should be good for consumers -- unless it’s a sign that demand for raw materials is ebbing because of a deeper slowdown in global growth.

The two hiding places that actually lived up to that billing this quarter: cash and high-quality bonds, particularly U.S. government debt.

On Friday, investors jumped back into Treasury bonds as stocks slumped. The 10-year T-note yield fell to 1.90%, down from 2.00% on Thursday and down from 3.16% on June 30.

But with Treasury yields near generational lows, they aren’t offering income-seeking investors much incentive to buy at this point. Wall Street’s remaining cadre of stock bulls argues that equities are cheap. And they may be right -- if the bottom isn’t about to fall out of the economy.

That’s setting up for another potentially wild market ride in October. More evidence of economic weakness could trigger a new selling wave. Better economic data, on the other hand, could bring a torrent of cash in from the sidelines, where it’s earning zero.

“Once you break either way I think it’s going to be pretty dramatic,” said Bill Strazzullo, market strategist at Bell Curve Trading in Freehold, N.J.

Just what everyone was looking forward to: more insane volatility.

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-- Tom Petruno

Follow me on Twitter: Twitter.com/tpetruno