Stocks slip amid economic gloom

Disappointment lingers over the Fed's lack of stimulus plans. Economists also view a drop in jobless claims with skepticism. US import and export prices fall. South Korea's central bank carries out its first easing action in years.

By TheStreet Staff Jul 12, 2012 9:22AM
Updated at 12:03 p.m. ET


By Andrea Tse


Stocks recovered some lost ground but remained lower Thursday amid lingering disappointment about the minutes from the latest Federal Reserve policy meeting, skepticism over the latest jobs report and concerns about the global economy.


A transcript of the Federal Reserve policy meeting, released Wednesday, showed that few members of the central bank's open-market committee favored additional stimulus at the June 19-20 meeting and suggested macro conditions would have to deteriorate much further in order to justify another round of quantitative easing.


The Dow Jones Industrial Average ($INDU) was down 31 points at 12,573 after recovering from a loss of more than 100 points in morning trading. The S&P 500 ($INX) was down 8 points at 1,334. The Nasdaq Composite ($COMPX) was down 29 points to 2,859.

 

"The minutes of the last FOMC basically told investors to get their rampant expectations of further quantitative policy firmly under control, because it is not happening anytime soon," said Paul Donavan, a global economist at UBS.


In economic news, the Labor Department said Thursday that initial jobless claims for the week ended July 7 fell to 350,000, the lowest levels since March 2008 and a decrease of 26,000 from an upwardly revised 376,000 in the preceding week. Economists had expected a decline to 372,000.


"We note that each summer, auto shutdowns give the government trouble, and the seasonals are very unreliable," said Dan Greenhaus, the chief global strategist at BTIG. "We absolutely do not believe this is a 'real' number."


"The improvement in claims was due in large part to seasonal factors, as there were fewer seasonal factory shutdowns than normal during the first week of July," said Millan Mulraine, a senior U.S. strategist at TD Securities. "This should be corrected in the coming weeks, and the level of claims should revert back to levels more consistent with the weak tone in labor market activity, possibly rising back to above the 370K level."

 

The four-week moving average was 376,500, a decrease of 9,750 from the previous week's average of 386,250.


Continuing claims for the week ended June 30 were 3.304 million, a decrease of 14,000 from the prior week's level of 3.318 million.


Meanwhile, the Bureau of Labor Statistics reported that U.S. import prices fell 2.7% in June after a 1.2% decrease in May. Lower prices for both fuel and nonfuel imports contributed to the overall decline. U.S. export prices fell 1.7% in June after a 0.4% drop the previous month.

 

The U.S. Treasury Department is expected to report at 2 p.m. that the U.S. government ran a $75 billion budget deficit June. The deficit was $43.1 billion the same time a year ago.


Hong Kong's Hang Seng Stock index closed down 2.03% and the Nikkei settled behind by 1.48% amid fears of poor economic growth data from China at the end of the week and after the Bank of Japan decided to pursue only small adjustments to monetary easing. South Korean's central bank also slashed its lending rate in its first easing action in more than three years, highlighting its concerns about the economy.


The FTSE in London was falling 1.28% and the DAX in Germany was sliding 1.12% as global slowdown concerns flooded the markets and overshadowed better-than-expected eurozone industrial production data for May, which had risen.


Walt Disney (DIS) received an upgrade from Wells Fargo early Thursday. Wells Fargo went to "outperform" from "market perform" on the stock, saying concerns -- such as the potential for margin contractions at ESPN -- that previously kept its optimism in check seem to have dissipated.


Fastenal (FAST) reported fiscal-second-quarter earnings of $112.3 million, or 38 cents a share, on sales of $804.9 million. The average analyst estimate was for a profit of 37 cents a share in the June-ended period on revenue of $807.7 million.


Shares of SuperValu (SVU) were dropping sharply after the Minneapolis grocery store operator reported a quarterly profit below consensus and suspended its dividend, saying it's conducting a review of its strategic options. The company, which is seeking to reduce its debt load by between $450 million and $500 million in fiscal 2013, posted a profit of $41 million, or 19 cents a share, for its fiscal first quarter on sales of $10.6 billion. The average analyst estimate was for 38 cents a share on sales of $10.8 billion.


Callaway Golf (ELY) said late Wednesday it's cutting 12% of its global workforce as part of an effort to generate gross annual savings of $52 million. The golf equipment maker also said it expects to report a pro forma loss of 55 to 75 cents a share for fiscal 2012. Wall Street's current consensus estimate is for a loss of 21 cents a share for the full year.


It could be a rough session for Family Dollar (FDO) shares after Bank of America Merrill Lynch lowered its rating on the stock to "underperform" and dropped its 12-month price target to $60 from $71, citing rising concerns about the off-price retailer's strategy and execution abilities.


More from TheStreet


284Comments
Jul 12, 2012 9:57AM
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senate has over 35 bills on their desks    pocketing obames budget   no budger of their own    What a worthless Bunch      reid pelosi all the lib dems   talk out of both sides of their mouth    They are a SORRY  BUNCH
Jul 12, 2012 9:49AM
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>>>>> "fiddling, while Rome burns."<<<<

 

a total lack of ideas from the entire gang in office. 

 

first, obama spends time on the health care plan while our economy dies.  THEN the republicans spend time trashing the health care plan while the economy dies. 

 

it's the modern way of re-arraigning deck chairs

Jul 12, 2012 9:32AM
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When the jobs market stays this bad for this long, it's much harder for people who are getting let go to qualify for unemployment bene's.  That's what we are seeing.  The labor participation rate is still in the tank.
Jul 12, 2012 10:16AM
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Over the weekend I attended a BBQ.
Many people of many backgrounds.
Many not paying mortgages anymore.
Some are going to sell homes ,good luck.
Some on unemployment numerous times and getting close to being done.
Small business owners have no more plans to renew high priced leases that have been increased due to vacancies in adjacent store fronts.
Many a workforce being trimmed for a "hold on" strategy till the holidays,great talking about the holidays in July now?
This took place in Cold Spring Harbor NY.

People are the market and by this account above market's today and future not good.
Jul 12, 2012 10:30AM
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As I have previously stated, Wall Street, the Congress, and most politicians don't do anything unless their own interest is at heart.  The idea of doing your job - which depending on the task - involves serving others without additional benefits for yourself (other than your paycheck - which is suppose to be for your service) has become an unknown entity.  

Congress is suppose to serve the people of the US and Wall Street should be looking out  for their clients, but both are so concerned with fulfilling their own agenda's that those who are suppose to be benefiting from their actions are completely secondary - if even considered at all.

While I know there are still some good legislators in Washington it is impossible to tell who they are since every story and news report heard today has been spun one way or another to the point that the truth is almost impossible to find.

Unfortunately TRUTH and HONOR seem to be 'Old School' virtues that seem to have gone out of style
Jul 12, 2012 11:52AM
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Oh, and by the way, all that GM stock that was bought at $53/share on behalf the taxpayers?  - Now trading under $20.  Another incredibly brilliant "investment" brought to you by your ever-so-wise federal government.
Jul 12, 2012 9:31AM
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Paul Krugman yesterday stated he would start to worry when debt vs.GDP got to 50%.Today Erskine Bowles,,Alan Simpson and Warren Buffet agreed Mr.Krugman should take a long leasurely vacation and they agreed at a number of approx. 21% on the high end.
Jul 12, 2012 9:54AM
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350k on initial claims is a really good number - suspiciously so, more than likely just an anomaly and most aren't putting much faith in it.  No question it will be revised up, just a matter of how much.

Back below 1.5% on the 10 yr - ridiculous.  The Euro continues to tank and I'm confident it will bounce back, but timing that correctly could quickly turn into a nightmare.

Have no fear traders, QE3 is coming.  Bernanke is playing coy right now, but it's just a matter of time.

If we could go back in time, to Fall of 2008, it would be interesting to do a survey of economists to see how many thought that over the next 4 years we there was even a possibility we would see the Fed would do 3-4 rounds of QE, plus the gov would tack on another couple trillion in stimulus.  Wonder how many would think this was even a possibility, let alone a good idea?  Probably not many.  But as incrementalism works, those that bought into the idea of the stimulus package and the first round of QE, were easily swayed that more stimulus and more QE was a good idea.  And yet here we are, several trillions of dollars later, WS is begging for yet another round of QE to prop up stock prices just a little bit longer, and the current prez is still talking about yet another round of stimulus measures.

Jul 12, 2012 11:08AM
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Unemployment number could have been anything...it doesn't matter.  Even the analysts are saying they don't believe the numbers.  At least they used to wait a few days before they trashed them.  The institutions are pocketing what they made during the week of the fourth.  No real investing going on here, just the institutions trying to prove who's the best gambler. It's the only game in town right now.

 

The only problem with this game is that there are a fixed number of chips so the money is just changing hands.  If they can get the FED to do another QE, they get a whole new pile of chips to gamble with.  It will pump things up temporarily but will only postpone the inevitable.  The institutions know it can't last but everybody wants to get their last bite before it all tanks.   

 

We are going to be in trouble until we become a nation of producers again.  There's no short term fix for that so you won't see any politician doing anything to address it.   Without action, our standard of living WILL to sink to the level of our trading partners.  It is inevitable.  Think of life before WW2.  That is our future.           

Jul 12, 2012 11:43AM
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I've said this before and here it is again. The New World order is right on schedule.  Congress is sitting back and doing nothing because what is happening is what they want to happen. The Internationals want to be able to move factories and trade  freely across international boundaries and to do this they need American wages to get down around $3.50/$4.00 US per hour. I also believe a New World currency will be in the offing.  Why else would the US Lawmakers allow  the US dollar to be scuttled through massive printing and debting?
Jul 12, 2012 10:09AM
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Better to offer a measurement of quality of jobs filled then just the numbers of employment. Even 100% employment at minimum wage would suck.
Jul 12, 2012 11:14AM
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OH YEAH, voting Obama back in is like ressucitating OSAMA

Both scare the hell out of me...specially with this HellCare....

 

There are two kind of people:

those who work for a living

and

those who vote for a living...you know the food stamps fans...

Jul 12, 2012 11:33AM
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joe tuna - you are SPOT ON!

Congress MUST start doing something to help create JOBS! and stop frikkin playing around because they are worried about their own bloody re-elections!

I think ALL of CONGRESS should be paid ONLY minimum wage until they get some work done to save the country!

Jul 12, 2012 9:41AM
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Wall Street gives aways gains again for old news that was priced in years ago!!! Back to negative for 2012 again.
Jul 12, 2012 11:35AM
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Here we go - WS is pouting about the Feds not giving them more free money and is starting to seek their revenge. It has nothing to do with the economy - it's strictly about milking the system with total immunity from retribution. 
Jul 12, 2012 10:31AM
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Gloomy Obama

Gloomy Economy

 

Bring Mitt in a hurry, please!

 

My dog would even handle the economy much better, at least it wouldn't tax me!

Jul 12, 2012 11:45AM
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"The stock market is up 55% since democrats took over clown"

Great, how did they make that happen?  Solid long term plans?  Good economic policies? Strong leadership that instilled confidence in business?  Perhaps it was their steamlining of the regulatory processes?  Maybe it was their instincts to let the free market work?  Oh wait, none of those things happened.

Our economic "recovery" is based on one thing - unsustainable DEBT.  Remember a few years ago, when a family making $50k a year was able to live in that $300k house and drive $50k cars and take their $30k boat out on the weekend while also eating out 6 times a week and taking a couple vacations a year to the Caribbean??  Sound familiar? - that too was built on unsustainable debt.  How'd that work out for ya?
Jul 12, 2012 11:07AM
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economic gloom. wtf is that? you dimwits need to quit giving all these stupid reasons for everything. stocks fall on greek worries, gas up on middle east fears, stocks down on job reports. the whole world is going down the crapper because of all the idiot's in charge and too many greedy people.
Jul 12, 2012 12:00PM
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psyched said:

 

"The govenment only reflects those opinions of their electorate. They bicker and posture just like the posters on this board. Civility and their mission about doing the right thing for the country is tied up in deadlock. There is no middle ground given. "The people" have spoken."

 

psych:

 

You are right.  The people have spoken and they have repeatedly said that THEY ARE AGAINST THE HEALTH CARE BILL.  All the polls, the 2010 elections, screamed that THE PEOPLE DON'T WANT THE HEALTH CARE BILL. 

 

So, aren't our representatives supposed to REPRESENT US?    The fact that one body (the Senate) may not pass a bill, is no reason for the other body (House) to not try and garner enough political will from the people to get rid of a bill that THE PEOPLE DON'T WANT.

 

I guess under your reasoning, if a bill passes or gets blocked that a majority of Americans don't want, then Congress is supposed to just "move on" to other things and ignore the will of the people. 

 

That isn't the nation that I live in. 

Jul 12, 2012 11:54AM
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"The currency is being used to produce incentive to get people to work."

No it's not, it's being printed, er, "digitized" and used to monetize the debt so the federal gov can hand it out in the form of record levels of food stamps, disability, welfare, UE benefits, etc...
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[BRIEFING.COM] The stock market punctuated July with a broad-based retreat that sent the S&P 500 lower by 2.0% with all ten sectors ending in the red. The benchmark index posted a monthly decline of 1.5%, while the Russell 2000 (-2.3%) underperformed to end the month lower by 6.1%.

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