Stocks suffer worst weekly loss in 5 months
The major averages see small gains but fall for the week as sparring begins between the White House and House Speaker Boehner on fixing the fiscal cliff. Apple rallies after three big losses. Disney sags. Kayak jumps after merger with Priceline.com.
After two nasty days of declines, the stock market struggled to finish ahead today. It succeeded with very small gains, but the major averages still had their worst weekly performance in five months.
If you want to thank someone for at least halting the losses this week, thank consumers, who are more confident about the economy. Thank Apple (AAPL), which rallied today after three straight declines.
Thank Priceline.com (PCLN), which is buying Kayak Software (KYAK), operator of the Kayak travel site, for some $1.8 billion. Kayak shares were up $8.63 to $39.67.
The wild card for the market today has been Washington and the fiscal cliff -- the mixture of government spending cuts and tax hikes set to take effect Jan. 1. Remarks today by President Barack Obama and House Speaker John Boehner suggested there remain big differences in approach. Big enough, in fact, the Dow Jones industrials ($INDU) briefly fell into the red after Obama said a solution to the fiscal cliff had to be balanced -- some tax increases and spending cuts. Boehner opposes any tax increases.
The Dow ultimately finished with a 4-point gain to 12,815. The blue chips had been up as many as 79 points and down as many as 26 after Obama's remarks. The Standard & Poor's 500 Index ($INX) gained 2 points to 1,380, and the Nasdaq Composite Index ($COMPX) gained 9 points to 2,905.
Article continues below.
The Nasdaq-100 Index ($NDX) rose 12 points to 2,584. Apple, which represents about 17% of the market capitalization of the index, rose $9.31 to $547.06. The shares had been as high as $554.88 after falling more than 8% in the past three days.
DIS) were flat today. But the entertainment giant's fiscal-fourth-quarter earnings and outlook disappointed Wall Street, and the shares were down $2.98 to $47.06.
The Dow fell 2.1% for the week, while the S&P 500 was off 2.4%, their worst weekly performances since the end of May. The Nasdaq's 2.6% loss was its worst since the week of Oct. 8.
Those losses were modest compared with the 3.2% loss suffered by Japan's Nikkei 225 Index ($JP:N225) or the 2.7% decline for Germany's Dax Index ($DE:DAX).
But the week still left the Dow S&P 500 and Nasdaq below their 200-day moving averages, a bearish sign for markets. But the market is oversold by other measures, with a bounceback rally at the very least due in the near future.
The big risks, of course, are the fiscal cliff and what happens in Europe.
|Markets for the week|
|11/9/2012||11/2/2012||% chg.||YTD chg.|
|U.S. Dollar Index||81.91||80.68||1.52%||1.72%|
Consumers are feeling better
The Thomson Reuters/University of Michigan’s preliminary index of consumer sentiment for November increased to 84.9 from 82.6 the prior month. Economists had expected a reading of around 83.
The gains were due to lower gasoline prices and an improvement in both housing and labor markets, according to Capital Research, an economic consulting firm.
Capital Research economist Amna Asaf was skeptical the gains in the index would translate into more consumer spendiing. The fiscal cliff will get lots of news play and may weigh on markets.
|Energy prices -- New York close|
|Fri.||Thur.||Month chg.||YTD chg.|
|Crude oil (-CL)||$86.07||$85.09||-0.20%||-12.91%|
|Heating oil (-HO)||$3.0055||$2.9554||-1.85%||3.13%|
|Natural gas (-NG)||$3.5030||$3.6080||-5.12%||17.20%|
|(per mil. BTU)|
|Unleaded gasoline (-RB)||$2.6992||$2.6073||2.62%||1.57%|
|(per gallon; AAA)|
A busy week ahead
The fiscal cliff will dominate headlines next week as will changes in China's leadership and events in Europe.
But the week will feature reports on producer and consumer price inflation on Wednesday and Thursday and important reports on manufacturing in New York and the mid-Atlantic states, also on Thursday.
Plus, the Federal Reserve releases minutes of its October meeting on Wednesday.
It's a big week for earnings, including:
- Monday: D.R. Horton (DHI) and Jacobs Engineering (JEC).
- Tuesday: Home Depot (HD), Cisco Systems (CSCO), Michael Kors (KORS) and Saks (SKS).
- Wednesday: Abercrombie & Fitch (ANF) and Staples (SPLS).
- Thursday: Wal-Mart Stores (WMT), Ross Stores (ROST), Viacom (VIA) and Gap (GPS).
- Friday: Ann (ANN), Foot Locker (FL) and J.M. Smucker (SJM)
The bad news for J.C. Penney (JCP) keeps getting worse. The struggling department-store chain reported today a wider third-quarter loss than Wall Street expected on a nearly 27% sales drop.
Shares fell $1.05 to $20.64 and are off 52% from their 2012 high, reached on Feb. 9.
Today's was the third consecutive quarter losses and sales declines as customers continue to show that they're unhappy with Penney's decision this year to ditch hundreds of coupons and annual sales in favor of everyday low pricing.
The poor results underscore the challenges facing Penney CEO Ron Johnson, the former Apple executive brought in a year ago to turn the company around. Since then Johnson, who masterminded Apple's popular retail stores, has been working to change everything at Penney's, from its stores to its merchandise.
The problem is it will takes years to get it all changed, and the big question is whether its board of directors will wait long enough for the changes to work.
Late today, Standard & Poor's cut the company's credit ratiing to B- from B+. That's deeper into junk territory.
At one point, all of the 10 sectors in the S&P 500 rose today. That list dropped to six at the close. The leaders were technology, health care and industrial stocks. The laggards were utility, consumer discretionary, materials and energy shares.
Boeing (BA), Caterpillar (CAT) and IBM (IBM) contributed nearly 30 points to the Dow by themselves. Twenty of the 30 Dow stocks were higher.
Meanwhile, 271 S&P 500 stocks were higher, along with 52 Nasdaq-100 stocks.
International Game Technology (IGT), medical-device maker Covidien (COV) and Cliffs Natural Resources (CLF) were the S&P 500 leaders. Disney, J.C. Penney and Microchip Technology (MCHP) were the laggards.
Research In Motion (RIMM) was the Nasdaq-100 leader, followed by Sirius XM Radio (SIRI). The laggards were Microchip Technology and Nvidia (NVDA).
Separately, Groupon (GRPN) was down $1.16 to $2.76. The online deals service posted third-quarter results that showed slowing revenue growth and a decline of its core business.
But Zipcar (ZIP) was up 96 cents to $7. The car-sharing company posted strong third-quarter results and is still on track to report its first annual profit in 2012.
Oil and gold rise
Crude oil (-CL) in New York settled up 98 cents to $86.07 a barrel. Brent crude in London, the bigger determinant in gasoline prices, had risen $1.99 to $109.24 a barrel.
The national average retail price of gasoline was at $3.456 a gallon, down from Thursday's $3.464.
Gold (-GC) had settled up $4.90 to $1,732.70 an ounce. For the week, gold was up 3.3%, its third-largest weekly gain of the year after the weeks of Jan. 23 and May 28.
|Short hits from the markets -- New York close|
|Fri.||Thur.||Month chg.||YTD chg.|
|13-week Treasury bill||0.0900%||0.090%||-18.18%||800.00%|
|5-year Treasury note||0.639%||0.643%||-10.63%||-23.01%|
|10-year Treasury note||1.613%||1.632%||-4.33%||-13.79%|
|30-year Treasury bond||2.752%||2.769%||-3.47%||-4.74%|
|U.S. Dollar Index||81.098||80.886||1.39%||0.72%|
|(in U.S. $)|
|U.S. $ in pounds||£0.629||£0.626||1.48%||-2.28%|
|Euro in dollars||$1.27||$1.27||-1.89%||-1.86%|
|(in U.S. $)|
|U.S. $ in euros||€ 0.786||€ 0.784||1.93%||1.89%|
|U.S. $ in yen||79.62||79.48||-0.23%||3.26%|
|U.S. $ in Chinese||6.26||6.24||0.51%||-0.96%|
|(in U.S. $)|
|(in Canadian $)|
|(per troy ounce)|
|(per troy ounce)|
|Crude oil (-CL)||$86.07||$85.090||-0.20%||-12.91%|
Well we hear....Cards a shuffling and wheels are spinning, bet it all on black....
Actually I think we did about 4-5 days back...??
ps...guess I can pick up CGT's report later...Have a nice day.!!
Volcker....Had something good a little earlier....Kinda sides with Brutus on opinions about "deficits and debts"....But, did agree also, they are and have been a "necessary evil."
I've had a terrible time posting anything long or well thought out....Plus we had company show up for a couple hours...Dang 4G, it's all Obama's fault.
Wait a minute that doesn't start until January 21st..2013....Right ??
i'm sure all ya heard of how large corporations are laying off people or getting ready too lay off ten's of thousands........these cuts are not just one sector but all sector's.......concerns are of fiscal cliff; debt down grade; OH'bominationcare; and old but always fresh "raising the debt ceiling" OH'bomination wants one.......!
THE COUNTRY IS SCREWED TIMES 100...........THE FED'S HAD TO OF RAISED THE RATE TWO YEARS AGO AND SHOULD BE AT 5%.......THE LONGER THEY DELAY; THE UGLIER IT GETS TO JUST THINK OF RAISING IT..........
PEOPLE JUST GET YOUR "PREPAREDNESS BACKPACK READY"........YUSE GOING TO NEED IT!
I wouldn't be surprised if within 2 years GDP growth is the same or bigger than the deficit.
2 years? 5 years? up to 10.....
I didn't say to cut spending. The stuimulus spending has largely already ceased, and the war spending would end with the wars, and automatic stabilizer spending would end with fewer people qualifying for the conditions that give it to them. I don't think the deficit will be that bad at that point, certainly less that our nominal growth. Plus I think there will be more of an appetite to address it when we are expanding. Not do something like start 2 wars while cutting taxes.
Discretionary spending isn't the long term budget issue. Never has been. Medicare has, and continues to be.
You are still living the fairy tale that our government is willing to cut spending, and that cut in spending will not cause GDP to drop. Good luck with that.
And just so you know, I HOPE LIKE HELL THAT YOU ARE RIGHT!!! Being a father and a homeowner, I don't need more floundering and trillion dollar deficits. I want prosperity!
I just disagree with how you think we can get there.
If the dollar is stronger, it makes no difference for anything prioduced domestically. All that happens is imported goods become cheaper, which aren't make from taxed labor. This is at the expense of jobs associated with export industries, so the UE rate increases as does safety net spending. Congrats, you've increased the deficit by diminishing tax revenue and increasing expenditures.
Fannie and Freddie are using their money to buy more mortages... That's pretty much what they do.
The reason the US is the best place to invest is because we're in a better position long run than anyone else. We have monetary flexibility, unlike Greece or Spain, and have a tax base that can provide sufficient revenue to reduce the debt to GDP ratio during normal times. We're the safe place because we're organically the best out there.
A RECESSION MAKES THINGS WORSE! I know you really don't want to look at history or Europe, but it really doesn't matter how many times you say it's the only way, it isn't. It's an incredibly self-destructive avenue that puts us a circumstance with even worse debts and limits our ability to build on them.
How to fix it? First, revenue increases by bringing passive income to normal income rates (average gain across the time the instrument was held for capital gains). Next, no cap for SS. Next, adopting a rationing method for Medicare. Not that you can't have treatment, but that you'll need to pay for it or work it out with the hospital. The passive income would need to be phased in over a few years, but these wouldn't create a severe drag on the economy. Once the war spending is over and tax revenues return to their old averages, I don't think we're running that much of a deficit.
And you do realize that things are in textbooks for a reason right? This isn't Texas where they just decide to vote to put garbage in there because it forwards a political motive. They're there because the information is well researched and relevant. Normally there are historic examples to point to, but I don't need to point to them because we have the alternate happening and it made everything worse!
I swear, did you see Indiana Jones and the Last Crusade? You're watching someone step on the 'J' and fall to their doom saying "Oh.. I guess that "J" must have had other problems. Let's try this 'J'"
"Swag: The dollar is a lot stronger than it was at the start of 2008... And a strong dollar actually puts is in a less competitive stance on the global stage, making export industies lose their customers and the jobs that go with it. Strategic devaluation of currency increases the ability of a country to export goods and services. Stronger dollars lead to one thing... cheaper imported goods."
AND allows my paycheck to stretch further. I'm like most Americans, I personally don't export anything. I want my expenses to be lower. A stronger dollar would give me that.
"The recent round is actually mostly clearing MBS's off Fannie and Freddie's books. The ones the B of A aren't being forced to buy back. The intension being to allow Fannie and Freddie to buy additional mortgages."
I wasn't sure where the Fed was buying it from, but to move the crap MBS's from one Fed agency to another does not change who's ultimately going to be on the hook for them. So then Fannie and Freddie are doing what with this new found money? I dunno, but I do wonder....
"I think what you mean by "I don't need to see it on paper to know it's true" is I don't care what reality is, and I don't care if it's right or not. This is what I WANT to believe."
What I'm saying is you and I both know what the one true, "safe" investment is still on the market today, and that's investing in America. My bigger point is I don't like why that is. Fed manipulation can't last forever, and we will pay for it on the back end.
"Starting the process right in an aggressive fashion now makes the deficit worse. We go into recession and tax revenues bottom out AGAIN. We have seen this over and over again. We see it in the UK. I know, you say they never tried austerity because they never had a surplus.. EXACTLY!! Increases in safety net spending from increased unemployment and decreases in revenue make deficits worse. Starting the process by looking at the picture and thinking about what can be done that doesn't cause a cataclysm in process is.. what we're actually doing."
So how, other than quoting your text book, do you purpose we do this? HC & energy costs (tied to military costs) are going to continue to rise, a 5% rise would be below what we have been seeing. How do you purpose we increase revenue, drop borrowing, and increase GDP by more than that 5%.
A recession is the only way.
Swag: The dollar is a lot stronger than it was at the start of 2008... And a strong dollar actually puts is in a less competitive stance on the global stage, making export industies lose their customers and the jobs that go with it. Strategic devaluation of currency increases the ability of a country to export goods and services. Stronger dollars lead to one thing... cheaper imported goods.
The recent round is actually mostly clearing MBS's off Fannie and Freddie's books. The ones the B of A aren't being forced to buy back. The intension being to allow Fannie and Freddie to buy additonal mortgages. Any individual or institutional investor that opts to take part in this would liekly be replacing it with more MBS's since they would need to inform off of their holders of any change in the portfolio's composition. If they move toward holding government debt, then it's because that's what the administrators see as the best holdings for their clients. Requiring, of course, disclosure and implicit acceptance of that change.
I think what you mean by "I don't need to see it on paper to know it's true" is I don't care what reality is, and I don't care if it's right or not. This is what I WANT to believe.
Starting the process right in an aggressive fashion now makes the deficit worse. We go into recession and tax revenues bottom out AGAIN. We have seen this over and over again. We see it in the UK. I know, you say they never tried austerity because they never had a surplus.. EXACTLY!! Increases in safety net spending from increased unemployment and decreases in revenue make deficits worse. Starting the process by looking at the picture and thinking about what can be done that doesn't cause a cataclysm in process is.. what we're actually doing.
Which once the Fed stops buying, is exactly what we will get. I would like to avoid that before it happens.
"We still wouldn't be experiencing the rates we are if there wasn't demand for our debt. The Federal Reserve's latest measures aren't even about US debt, it's MBS's."
They are buying the MBS's, freeing up pensions and other investors to buy........ treasury bonds. I don't need to see it on paper to know it to be true. It's more about the Fed being a fake player than anything else.
"When rates increase again, the ability to adjust would be medium term at best. Again, if we aggressively go after the debt now the debt to GDP gets worse and our long term ability to meet those obligations suffers at any rate. Growing now puts us on a better footing to handle those rates later."
Unless the real issues get addressed, namely HC and energy / defense costs, we will NEVER be able to grow fast enough to out pace the debt. And any cut in borrowing brings GDP down. And with 2% growth all we have been able to muster, even with the 7%+ borrowing, how you expect to all the sudden grow faster than borrow and not see a recession is beyond mind boggling.
"And the debts we extend are fixed rate, not variable. So newly issues debt is under 2% for 10 years regardless of what rates do in the meantime."
It's not the "today" borrowing, it's the reliance on it going forward. We will not all the sudden be able to stop it. We need to start the process now, so that we are already not in need of the borrowing when the cost is higher.
"Food and fuel have more to do with growing conditions and global conditions than anything. Meat is actually cheaper than it's been in a long time. And fuel is cheaper than it was in 2008, and steady for about the last 2 years. When durable goods are increasing dramatically, then there's an inflationary threat. (Besides, inflation would be on the monetary side, not the deficit)"
Many factors, yes. But with a stronger dollar our costs would be lower. What I care about most is JOBS and COST OF LIVING.
Pockyclipse +6 // November 12, 0001 A.S. (After Socialism)
Today our exploration team finally gathered enough courage to venture outside of our fortified bunker. Everything looks so strange and foreign now.
My lungs spasm as they draw in the noxious fumes of this new and hostile environment. Surprisingly the air does contain enough oxygen to survive.
We were certain that when the sky fell, it would displace the oxygen on the surface of the planet, thus ending all life as we know it.
Our eyes cannot yet believe the seemingly normal appearance of our surroundings.
This is far, far worse than any of us could have ever imagined. They have completely masked the carnage and destruction!
Suddenly someone in the exploration party shouted "It's some sort of clever communist ploy or trick!!" We raised our weapons and hastily retreated back into the bunker.
Once inside, I fell to my knees and shook my fist at the heavens and shouted "I MUST NOT YIELD, I MUST NOT BELIEVE, I MUST NOT SURRENDER!!".
Swag: Your list is either misunderstanding or misallocating the impact of deficts.
Running high deficits, when they're negatively impactful, actually serves to raise interest rates since loanable funds are more scarce. Savers displace part of their saving to finance the government, leaving less for the private investment market. This scarcity increases the market price for their loans, pushing banks to offer higher interest rates for illiquid savings. (Liquid savings has been between 2 and 0 since about 1990.)
We still wouldn't be experiencing the rates we are if there wasn't demand for our debt. The Federal Reserve's latest measures aren't even about US debt, it's MBS's.
When rates increase again, the ability to adjust would be medium term at best. Again, if we aggressively go after the debt now the debt to GDP gets worse and our long term ability to meet those obligations suffers at any rate. Growing now puts us on a better footing to handle those rates later.
And the debts we extend are fixed rate, not variable. So newly issues debt is under 2% for 10 years regardless of what rates do in the meantime.
Food and fuel have more to do with growing conditions and global conditions than anything. Meat is actually cheaper than it's been in a long time. And fuel is cheaper than it was in 2008, and steady for about the last 2 years. When durable goods are increasing dramatically, then there's an inflationary threat. (Besides, inflation would be on the monetary side, not the deficit)
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