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Worry settles over Wall Street as stocks stall

Just a few months ago, investors thought the economy would grow rapidly this year. Now they’re not so sure and shifting money around in surprising ways, a sign that confidence remains fragile five years into a recovery.
By BERNARD CONDON and STEVE ROTHWELL, Associated Press Published: May 16, 2014
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Wall Street has caught a case of the jitters.

Employers are hiring at their fastest pace in 2 1/2 years, the economy is expected to expand by a robust 3.5 percent this quarter and corporate earnings have hit a record. But you wouldn’t know it from the way many investors are acting.

They’re pouring money into U.S. Treasury bonds, considered the world’s safest asset. They’re loading up on dull, but reliable utility stocks. They’re dumping holdings that would get hurt most from a stalled recovery, like stocks of retailers and risky small companies.

Just a few months ago, investors thought the economy would grow rapidly this year. Now they’re not so sure and shifting money around in surprising ways, a sign that confidence remains fragile five years into a recovery.

“It doesn’t take much — an itsy-bitsy sell-off — and suddenly everyone is conservative,” says Jim Paulsen, chief investment strategist at Wells Capital Management. “We’ve climbed a wall of worry throughout this recovery and we’re still doing that.”

Many experts had expected a recovery that finally felt like one this year.

But the year is unfolding somewhat off script.

Small-company stocks that are often good bets in an accelerating economy are teetering on a “correction,” Wall Street parlance for a drop of 10 percent from a high. Many Internet stocks, the ultimate optimistic bet, passed that low weeks ago. Meanwhile, utilities — unsexy, but stable — have soared 10 percent so far this year, more than double the gain of any of the other nine sectors in the Standard & Poor’s 500 index.

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