NEW YORK The Dow Jones industrial average .DJI slid on Friday into bear market territory as investors fretted about the impact of record oil prices and mounting credit losses in the financial sector.
To confirm a bear market cycle, or prolonged period of falling stock prices, the index needs to end the session at least 20 percent below its closing peak, reached in October.
KEY POINTS: * The Dow was down 124.98 points, or 1.09 percent, at 11,328.44, which was 20 percent below its record close on October 9, 2007.
MATTHEW STRAUSS, SENIOR CURRENCY STRATEGIST, RBC CAPITAL
"It highlights the severity of the problems in the U.S. We had what now almost looks like a dead cat's bounce after the Bear Stearns bail out, but the underlying problems in both the U.S. financial sector and the economy are still very much with all of us. It sets the dollar up for a challenging week, we are getting a number of U.S. data releases. If we get weaker than expected jobs data, with the ECB hawkish or indicating there might be more rate hikes after Thursday's hike, in this environment, there is a likelihood that we could retest the 1.60 level (on euro/dollar)."
CHRIS ORNDORFF, HEAD OF EQUITY STRATEGY, PAYDEN & RYGEL, LOS
"I'd say we've been in a bear market for a while. I don't think the bear market is just starting. If you didn't think we were in a bear market in January, you must not have been awake."
JIM VOGEL, INTEREST-RATE STRATEGIST, FTN FINANCIAL, MEMPHIS,
"Treasuries are up on somewhat thin volume. We are going to need to reconfirm these levels after the holiday week and after we see nonfarm payrolls. The reaction (in Treasuries) makes sense but it's too soon to call this a reversal of the last three months. Anybody that has to buy is dealing with some illiquidity and people unwilling to short the market because you have quarter-end, holiday staffing, an important economic number and (Fed Chairman) Bernanke speaking in July."
BRUCE ZARO, CHIEF TECHNICAL STRATEGIST, DELTA GLOBAL ADVISORS,
"I keep an eye on the Dow, but it's more of a psychological indicator that its in a bear market. What's driving this is, I believe a worry about second quarter GDP and earnings.
"Yesterday one third of the Dow components made 52-week lows and it took out the January low. It's no surprise the market has resumed its down trend. I think we may go below 11,000.
"I think this is corresponding in part to the summer time, it's tough for the market to gain any traction. I think we're in for more bumpy, downside trading.
JACK ABLIN, CHIEF INVESTMENT OFFICER, HARRIS PRIVATE BANK,
"I think we're getting very close to what I would call fair value and a good deal. I don't so much worry about the 20 percent, although I'm sure it will ultimately impact investor sentiment, so that's an issue and could create a more compelling buying opportunity.
"I actually view it as an opportunity. My sense is the more investors assume the market will go down, the more they've already sold. I would prefer widespread pessimism as an entry point just because, if everybody hates it, then they've sold.
"If finally we get oil to break or some kind of catalyst, obviously I'd like to see the market drop even more here, and then we need either some sort of capitulation or some kind of a battle to make a finally turn... maybe it's second-quarter earnings. If we get some sort of run, that could be a good entry point from now to the end of the year."
JOE MANIMBO, CURRENCY TRADER, RUESCH INTERNATIONAL,
"Having stocks now officially in bear territory adds another psychological damp on the dollar. The currency is particularly vulnerable to the yen, because of carry trades. And that is why we are seeing it taking a dip in the afternoon."
JOSH STILES, SENIOR BOND STRATEGIST, IDEAGLOBAL, NEW YORK:
"I think the Dow is going to work its way down to 10,700 and there will probably be a double bottom in the dollar and then we'll get some recovery and that will steepen the yield curve a little more. Two-year yields can work their way down to 2.5 percent (they are now at 2.63 percent) especially with a weak (June U.S.) payroll number expected next Thursday. But I don't like the 10-year note anymore. A weak economy is good for the 2-year because it keeps the Fed on hold. But high inflation is bad for the 10-year."
JEFF HLAVACEK, DIRECTOR OF FIXED INCOME TRADING, BNP PARIBAS,
"The Treasury market had a reasonable underlying tone to it. As soon as stocks turned decisively into the red the market firmed up.
"The Dow clearly is the bellwether, not only the indicator of what is going on domestically, but (is showing) concern about what is going on globally.
"Equities, since the credit rout began in August of last year, have never really truly reflected big concerns over the economy."
MARKET REACTION: * BONDS: U.S. Treasury debt prices extend gains to session highs * CURRENCIES: U.S. dollar extends drop against the yen, falls against the euro * STOCKS: U.S. equity indexes all fell more than 1 percent
EARLIER DATA FROM JUNE 27:
US personal spending rises in May