Stocks tumble on global economic fears
The CBO warns of a US recession in the face of a 'fiscal cliff.' Eurozone members are asked to prepare for a Greek exit. Shareholders sue Facebook and Morgan Stanley. Home sales and prices rise.
U.S. stocks were trading at session lows midday Wednesday on ballooning fears of a Greek exit from the eurozone.
Adding to worries was the Congressional Budget Office's warning that the U.S. economy could fall into a recession if steep tax increases and scheduled government spending reductions were to go into effect January.
Hewlett-Packard was taking the biggest hit ahead of its quarterly report after the closing bell. The big miss and tepid guidance of rival Dell (DELL) after Tuesday's closing bell was raising concerns about the performance of HP, which is expected to announce a restructuring plan that may include the elimination of as many as 30,000 jobs. Analysts expect HP to report fiscal second-quarter earnings of 91 cents a share on revenue of $29.92 billion.
Dell shares were down nearly 16%, hitting a low of $12.49 earlier in the session, a level unseen in three years. Volume of nearly 50 million was more than three times the issue's trailing three-month daily average churn.
In the broader market, there were four losers for every winner on the New York Stock Exchange and three decliners for every advancer on the Nasdaq. The sectors being hit hardest were basic materials, energy, conglomerates and capital goods.
“I think in the markets there’s a slow realization that the outlook for growth and stable growth is not as good as it was even a week ago,” said Brian Gendreau, market strategist with Cetera Financial.
Wall Street finished mixed Tuesday as concerns about Greece's potential exit from the eurozone resurfaced in the final hour of trading. Late in the day, former Prime Minister Lucas Papademos was quoted as saying the country is considering preparations for a potential exit from the single-currency bloc.
European leaders were set to meet Wednesday at an informal dinner in Brussels -- their 18th gathering there in the past two years -- to discuss ways to soften austerity measures that are causing political turmoil in Greece and other weaker European nations. They will also discuss other controversial policies, including the creation of eurozone bonds, which has been stiffly resisted by Germany.
Specific items for discussion on the agenda, according to a Societe Generale note, are a 10 billion-euro increase in capital for the European Investment Bank for infrastructure projects; making greater, proactive use of European Union structural funds to aid development in poorer countries; and introducing commonly backed "project bonds" to fund pan-European infrastructure projects.
"It is this final proposal that is proving the most controversial, with France in particular pushing project bonds as a sort of Trojan horse that may potentially end up being a steppingstone on the way to common European government financing achieved through full Eurobonds," Societe Generale analysts said.
Reuters reported that eurozone leaders told members to prepare contingency plans in case Greece leaves the bloc. Germany's central bank called the potential departure "manageable."
London's FTSE was settled down 2.5%, and the DAX in Germany closed down 2.3%.
“I still think that Greece and Portugal will eventually exit the common currency by end of this year or early part of next,” said Dwight Johnson, chief economist at California Credit Union League. “Then we’ll be in the throws of how much Spanish debt to write off.”
Also Wednesday, Germany managed to sell 4.56 billion euros ($5.8 billion) in new two-year bonds with a zero-yield coupon and average yield of just 0.07%, highlighting the anxiety among investors about a Greek eurozone exit and their strengthened desire for haven assets.
The Hang Seng Index in Hong Kong settled down 1.3%, and Japan's Nikkei average closed off 2%.
The Congressional Budget Office warned that the U.S. economy could slip into a recession in the first half of 2013 as the nation heads towards a "fiscal cliff" in January that could suck more than $500 billion from the economy in 2013.
The benchmark 10-year Treasury was rising 10/32, lowering the yield to 1.737%. The greenback was rising 0.3%, according to the U.S. dollar index.
The Department of Commerce reported that new single-family home sales rose 3.3% to a seasonally adjusted 343,000-unit annual rate in April, from an upwardly-revised 332,000 in March. The April rate was better-than the 335,000 figure economists surveyed by Thomson Reuters were expecting.
The July crude oil contract was down $1.61 at $90.24 a barrel. June gold futures were down $39 to $1,537.60 an ounce.
In corporate news, Facebook (FB) and banks including Morgan Stanley (MS) were being sued by the social network's shareholders, Reuters reported. The plaintiffs said the defendants hid Facebook's weakened growth forecasts ahead of its $16 billion initial public offering, according to the report. Facebook shares were rising more than 3% after two straight days of declines.
Toll Bros. (TOL) posted second-quarter profit of 10 cents a share, a swing from a year-earlier loss of 12 cents. The latest quarter included a tax benefit of $1.2 million. Revenue rose to $373.7 million from $319.7 million. Analysts expected earnings of 3 cents a share on revenue of $381 million.
PetSmart (PETM) was a standout gainer in Wednesday's trading after its above-consensus performance in the first quarter. The pet products retailer posted earnings of $94.7 million, or 85 cents a share, up from a profit of $70.9 million, or 61 cents a share, in the same period a year earlier, and well ahead of the average analysts' estimate of 73 cents a share.
SAP (SAP), the German IT services giant, said Tuesday it reached an agreement to buy Ariba (ARBA) for $4.3 billion. SAP's offer of $45 a share offer represents a 20% premium to Ariba's closing price on Monday. The deal is expected to close in the third quarter.
Good morning everyone!
Yes, Greece is not going away. The real worry should be is that once Greece leaves the Eurozone that Spain, Ireland, and Portugol leave as well. The result of this would be such a great strain on the international banking system that it will not be capable of functioning.
Watch the price of crude closely this week. We are nearing of my earlier prediction (April) of $90 a bbl and a free fall from that point to down around $75 a bbl.
We also need to ask why our good Socilaist leaders in Washington are predicting GDP growth of 3% for this year yet the Fed is hinting at QE-3. Why would we need QE if we will be growing the fastest we have over the past 4 years?
Um, hate to disillusion the 'experts', but for a majority of this country, the recession never ended. Economists play with numbers better then a crooked bookie, but the reality is that most of us are living on 40%- 50% (IF we're lucky enough to have a job) of what we were making 4 years ago with necessary (gas, food, utilities, etc) bills increasing about 30%.
Love the people who really believe either candidate will help, but I'm in the growing population that honestly believes none of them have any interest in helping anyone but themselves.
All today's economic news from Europe sounds familiar, does it not?
I guess 'ol Ben and the Fed will step in and save the day and buy more Euros, again, with our tax money and look like they know what they are doing.
SHAME on all our elected officials!
Morgan Stranley is now being investigated for insider trading on the FB IPO, Biden blames the Tea party for the economic problems, wages are stagnant and haven't kept up with 8% real inflation AND we have a real U-6 unemployment rate of 19%. The Federal Reserve will continue to bail out Wall Street and the Big banks since the fed is a private institution with all the main thieves sitting on the board. One big good ol boy network
We currently have a 2% growth rate and if the tax cuts are allowed to expire it will saddle the average taxpayer with an additional 4% in taxes and will reduce spending to the point we will have -2% growth in an economy driven by 70% personal consumption. meanwhile we are guilty of re-electing the same idiots to represent us in Congress and fight among ourselves over party politics. If WE as US citizens don't wake up and kick the whole damned bunch out and make it clear to the next bunch that they work for us this country is going to end up just lie a third world country. We need to elect folks that will end the fedral reserve, get a balanced budget amendment in place, reduce taxes and reduce spending. Fat chance with any of that in this "Me" society.
"In other domestic news, the Congressional Budget Office warned that the U.S. economy could slip into a recession in the first half of 2013 as the nation heads towards a "fiscal cliff" in January that could suck more than $500 billion from the economy in 2013."
In other words, if Barack "Jimmy Carter" Obama is re-elected, the US economy will most certainly slip into a recession as the Democrats pull the car out of the ditch and speed directly over the cliff Thelma and Louise style!
Good Morning! Here we go for another round of the 'May sale off'. Very disappointing news coming out of Dell corp. and the facebook fiasco is just starting to heat up.
And then again, there is the EU ! All I can say is get out and distance yourself (your money) from any and all Euro related investments- start investing locally, in your own community, state, and America. Europeans (Greeks, Spaniards, Italians & Irish) are already pulling out their deposits and clamoring for safe havens in France & Germany.
Next time hit it right on the head: If you want to be able to save the world, you have to take care of yourself (your community) FIRST!
What most don't understand is the interconnection between all the Industrial Worlds Central Banks. Yes now when Europe sneezes we catch a cold! It did not come out until 3 years after the fact about the Feds 3.7 Trillion dollar next to no interest loan to Wall Street. .0003% or some rediculous low figure like that. They still would not free up money for lending even after the Tax Payer Bailout but they take free money from the Fed.
I wonder how long it will take before it comes out how much the Fed gave to Euopean Banks at little to no interest, it will be on par with what they gave Wall Street. When the Fed says they can't do anything about the next bubble busting they are telling the truth. The Feds meddling and coddling international banks has put the whole economic system in jeapordy!
Socialism bailing out capitalism has been a complete failure, they should have let the weak and incompetent fail as a true capitalist would have. All we they have created now is a bunch of sick and weak international banks and govenment treasuries. They should have come to the conclusion they could not influence a system that has no rules or quidelines anymore before they pumped trillions into the corrupt system!
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[BRIEFING.COM] Stocks entered the weekend on a mixed note as the S&P 500 shed 0.1% while the Dow ended with a gain of 0.1%.
The major averages began the day on a lower note as nine of ten sectors saw losses of more than 0.5%.
The consumer staples sector was the lone exception as the group spent the entire day in positive territory thanks to the relative strength of Dow component Procter & Gamble (PG 81.89, +3.19). The second-largest staple stock advanced ... More
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