Recession fears spook stocks
Service-sector activity slows, though US companies added more jobs than expected in July. Global markets plunge. Gold continues to soar.
By Melinda Peer, TheStreet
Updated at 1:24 p.m.
Stocks pared earlier losses as oversold market conditions attracted some buyers, but uncertainty regarding the strength of the economic recovery persisted.
The Dow Jones Industrial Average ($INDU) was down by 64.3 points, or 0.5%, at 11,802. The S&P 500 ($INX) was lower by 6 points, or 0.4%, at 1,247, and the Nasdaq ($COMPX) was falling by 2.8 points, or 0.1%, at 2,666.
Stocks sold off after activity across the services sector unexpectedly slumped, according to the Institute for Supply Management's non-manufacturing index. The index fell to 52.7, missing expectations for a reading of 53.7, after June's level of 53.3.
The non-manufacturing figure overshadowed news that companies added 114,000 jobs in July, according to Automatic Data Processing. The gains were slightly above the increase of 100,000 positions that economists had been expecting, according to Briefing.com. In June, the private sector added 145,000 payrolls, which was downwardly revised from initially reported additions of 157,000.
The look at private-sector job growth comes ahead of Friday's July employment report from the government. The market projects 84,000 additional nonfarm payrolls in July after June's meager increase of 18,000 jobs.
”We had a pretty good bout of panic there for a few minutes when we slipped under yesterday’s low, and now the dip-buyers are working on a ‘snapback,’” said RealMoney contributor Rev Shark in a recent blog post.
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”We are well off the panic lows, and confidence is improving a little, but keep in mind that a lot of folks now are ‘stuckholders,’ and they are looking for exits if they can escape with minimal damage. That is what overhead resistance is all about, and we have plenty of it,” he said.
Conglomerates and consumer staples were helping the rebound with 3M (MMM), Coca-Cola (KO), McDonald’s (MCD) and General Electric (GE) topping the Dow.
Energy was the session’s weakest sector. Chevron (CVX) was the Dow’s biggest laggard alongside Caterpillar (CAT), Merck (MRK) and Pfizer (PFE).
Market breadth was decidedly negative with 70% of the 2.9 billion shares trading on the New York Stock Exchange falling while only 28% were rising. There were 1.3 billion stocks changing hands on the Nasdaq.
Investors remain skeptical about struggling European countries’ abilities to pay down debts. On Wednesday, the cost of insuring against an Italian default hit a new high of 360 basis points. On Tuesday, yields on Italy’s benchmark 10-year bonds touched euro-era highs of 6.1%.
The FTSE in London plunged 2.3%, and the DAX in Frankfurt also lost 2.3%. Hong Kong's Hang Seng dropped 1.9%, and Japan's Nikkei fell 2.1%..
In other economic news, the Census Bureau’s June factory orders report that showed June factory orders declined 0.8%, which was slightly better than the drop of 1% that the market had been anticipating. In May, factory orders rose 0.6%.
Safe-haven assets remained attractive to investors amid increasing concerns that sluggish growth could push the economy into a double-dip recession. Gold prices spiked, trading as high as $1675.90 an ounce. Gold for December delivery was last up by $24.60 at $1,669.10 an ounce.
The September crude oil contract was shedding $2.24 to trade at $91.55 a barrel.
Yields on U.S. Treasuries were back on the decline Wednesday. The benchmark 10-year Treasury was rising 5/32, diluting the yield to 2.592%.
Media and entertainment company Time Warner (TWX) surpassed analysts' second-quarter expectations with adjusted earnings of 60 cents a share on sales of $7.03 billion. Consensus estimates had been for a profit of 56 cents a share on revenue of $6.82 billion. Shares were falling 2.9% to $33.
Shares of Hertz (HTZ) were flat at $12.99 after the rental-car company reported better-than-expected second-quarter earnings and raised its 2011 outlook.
Video, high-speed Internet and phone services provider Comcast (CMCSA) topped analysts' estimates by a penny with second-quarter adjusted earnings of 42 cents a share. Revenue of $14.2 billion was also better than the $13.83 billion in sales that the market had been projecting. The stock was gaining 0.5% to $22.86.
The Energy Information Administration said crude oil inventories rose by 950,000 in the week ended July 29, falling short of the gain of 2 million barrels that analysts had been expecting, according to a Platts survey.
The dollar weakened against a basket of currencies, with the dollar index down by 0.6%.
The key for all of us going forward is DEBT. Get your finances in line, stop borrowing money on things you can't afford. Get your personal family budgets in check.
Big government, regardless of the party in charge, needs us overleveraging to maintain their spendthrift ways, and in the long run it's leaving us, the consumers, in worse shape year after year. Do your due diligence, make smart financial decisions, go without until you can properly afford it, and we can take our financial futures back, one person at a time.
Yes, the rich are too rich. Yes, the government continues to spend too much. And yes, our once good intentions on entitlement programs for the less fortunate have gone array. But if we all just do our part and get our own fiscal houses in order, refusing to live beyond our means and make the most of what we have, we can truly stop all of these games and get our country back.
Think about it.
It's always interesting how "Dr. Jekkyl and Mr. Hyde" many people really are when it comes to money. They run their own finances, own businesses, own households one way with a certain set of principles, but when they get put in charge of someone else's money, those principles go out the window. Look around and you'll see it everyday, from the people on the school board to the executive board at your church or your local homeowners association board or whatever - when dealing with OPM, many people just aren't interested in getting the most value for a dollar, as least not as much as if that dollar were their own. Now take a group of people who aren't good stewards of other people's resources and put them in charge of a few trillion dollars and you've got what we have now - a dysfunctional congress and president that are completely out of touch with reality and the value of a dollar.
Ok...it sounds as if most of us agree, in some respects
What to do
1) Only purchase items that are 100% made in America
2) Save, as much as you can instead of running up Credit Card Debt
3) Elections, VOTE for those that have a record of Saving instead of Spending
4) Stop wasting money on Movie and Record Industry, why (Because most of those in this business support politicians that waste money)
NOTE: If you need entertainment, spend more time with your kids.
Forget China, India, etc.
America has too many imports, too few exports.
Take a second to look over an item before buying to see if it was "Made In the USA."
If it isn't, look for something that is or do without if possible.
Support your local businesses that buy American!!!
We need to take care of our own now.
Times are going to get even rougher so if we want to
help our country survive we should do our part to help each other.
delk,
Drop the "past." Just for a sec. I agree poor management was displayed, but going forward, we have the power to take it all back. JUST SAY NO!!! If we refuse to play the same games, and each and every one of us refuse to keep "feeding that beast" that you so properly point out (although your Repub only finger pointing is misguided), we can cut them out at their knees!!!
Stop allowing your passion from the past clouding your vision of our road out of this. The sooner we can all drop the party attitude and take away their leverage, getting our own financial situations stable and in our own control, you will get the fix you desire.
But not from blind, angry support of the Dems. They will rape you just the same.
"Recession fears spook stocks"
Hate to clue you in, but most hard working average American households never got out of the recession 2yrs ago. Stagnant wages and rising energy costs, mostly gasoline, have halted any progress in the growth of the economy. Until these millionaires in congress really have a clue how people are struggling, and oil speculators keep runnig up oil, we will soon be among the ranks of poor nations.
To all concerned. Look, we screwed outselves, by ourselves, and sooner or later, we have to pay the piper. I had friends who bought a $ 300,000.00 home on zero down and dirt cheap teaser ARM mortgage rates who made $ 50,000.00 a year. I did not. During the time that they were "lavishing" in their $ 300,000.00 home, I was living in a mobile home (fancy word for a trailer), saving up to put substantial down on a house. Guess what, for my friend, the "teaser" mortgage rate went up, his monthly mortgage went up to a point that he could no longer afford to make the mortgage payment. He tried to refi the house at a fixed rate, but the bank wou't talk to him since he is deeply underwater on his mortgage. So I suspect that being stuck between a rock and a hard place, he will just send the keys to the bank, and let the bank eat up his losses. Of course, if he does this, his credit is roined, but I say too bad.
The moral of the story, is that we really have to think about being financially responsible again. Both people, and Governments have to do this, and if we do this in the long run, we will be far better off as a country.
havasu46, if 'entitlements' are EARNED and PAID FOR then you should have ZERO issue with the following adjustment to the 'entitlements' .
You may NEVER under and circumstances take out more from the program than you put into it. The progam may never issue your savings to someone else.
I recall a certain congressman from Chicago, who proposed catastrophic healthcare coverage in the 80's. Everyone was for it, but it contained a provision that those recieving the benefit would be charged what the cost of the program was annually. When the people recieving the benefit, found out they would have to pay for it they practically lynched Rostenwoski... It was funny to see old people caring signs that 'someone' else should pay for the benefit.
This is the fundamental problemwith entitlements. SOMEONE else gets the bill...
Medicare Part D is a great example. The people collecting today contributed NOTHING toward it. Someone else is PAYING for them. Of course those recieving the benefit love it, those paying it (who likely will recieve nada) don't like the idea...
People won't spend because they're already strapped for cash. Unemployment will rise because people not spending.
And thanks to the new debt deal taxes, both local and at the state level will most likely rise.
There's going to be a lot of hungry, unemployed, homeless people out there trying to stay alive so without any support the crime rate will increase too. Who's gonna stop them? Cops will be have to be laid off too. My guess it's going to be every man for himself. May God bless us all!
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