Stocks trim losses after Spain's banks pass stress test

But markets are still watching for a possible Moody's downgrade of Spanish debt. In the US, the ISM's Chicago PMI slips and consumer spending barely rises. Facebook shares jump 7% on the site's new gift feature.

By Melly Alazraki Sep 28, 2012 9:26AM
ComstockUpdated at 3:01 p.m. ET

Stocks trimmed earlier deep losses after results of a stress test on Spain's banks showed them to be mostly solvent.

The Dow Jones Industrial Average ($INDU) was down 43 at 13,442 after having fallen more than 100 points early in the session. The S&P 500 ($INX) was down 5 at 1,442. The Nasdaq Composite ($COMPX) was down 13 at 3,124.

The results indicate the banks' recapitalization needs amount to 59.3 billion euros ($76.3 billion), the Bank of Spain and the Economics Ministry announced. The results came in line with analysts expectations, MarketWatch reported. "The results confirm that the Spanish banking sector is mostly solvent and viable, even in an extremely adverse and highly unlikely macroeconomic setting," the joint press release said.

Markets are still watching for a potential downgrade of Spanish sovereign debt by Moody's Investors Service either late Friday or late Sunday.

All these steps are crucial for when the country asks for aid. European stocks were higher earlier Friday in response to Spain's budget announcement but quickly turned negative later in the session.

On Thursday, U.S. stocks snapped a four-day losing streak after an upbeat jobless claims report and a Spanish austerity plan that focuses on spending cuts instead of tax increases. The plan aims for $16.7 billion in budget cuts. The Spanish government said it expects to meet the 2012 budget deficit goal of 6.3% and set a deficit target of 4.5% for 2013. Borrowing costs in Spain eased after the announcement.
Asian stocks were mostly higher on the last day of the third quarter, with investors encouraged by Spain's budget plan and hopeful that the Chinese government will take steps to stimulate the economy. Japanese stocks, though, declined on weak monthly industrial production data and amid concerns about the fallout from the country's territorial dispute with China.

US spending, income barely rise
Consumer spending in the U.S. rose in August by 0.5%. Although that was the most in six months, when adjusted for inflation, spending barely rose 0.1%. Even that small increase reflects mostly rising gasoline prices. Consumer spending accounts for about 70% of economic activity in the U.S., so such a slow rate of spending growth isn't encouraging for GDP growth.

Personal income also rose just 0.1%, and, with inflation and taxes factored in, income fell 0.3%.

Since spending rose faster than income, the U.S. savings rate fell to 3.7% from 4.1% -- the biggest one-month decline in a year. Also, the core PCE price index inflation gauge rose a scant 0.1% in August. Over the past 12 months the core PCE has risen 1.6%, within the Federal Reserve's preferred zero-to-2.0% range.

Business activity in the U.S. unexpectedly contracted in September for the first time in three years. The Institute for Supply Management said its Chicago purchasing managers index fell to 49.7 in September from 53 in August. Any reading below 50 indicates contraction. This is the lowest level in three years. Economists had expected a much smaller decline to 52.9, according to Briefing.com.


Consumer sentiment rose to 78.3 in September from 74.3 in August, according to reports on the University of Michigan-Thomson Reuters consumer sentiment gauge. While sentiment rose to its highest level in four months, it was much lower than a preliminary September reading of 79.2 and economists expectations of 79. The sentiment gauge averaged about 87 in the year before the recession.


Stocks to watch

Research In Motion (RIMM) shares surged after the BlackBerry maker reported better-than-expected sales late Thursday. The company reported an adjusted loss of 27 cents a share, which was much better than the loss of 47 cents per share analysts were expecting, according to FactSet. CEO Thorsten Heins also said Friday on CNBC that RIM will first release a new touchscreen version when the BlackBerry 10 goes on sale in the first quarter of 2013.


Bank of America (BAC) has agreed to settle a class-action lawsuit with with investors who suffered losses after its 2009 Merrill Lynch acquisition for $2.43 billion. The bank will incur charges related to the litigation that will cut third-quarter earnings per share by about 28 cents. The company also said it will institute certain new corporate governance policies as part of the settlement.


Nike (NKE) shares fell after the maker of athletic shoes and apparel reported adjusted earnings of $1.27 per share, which topped analysts estimates of $1.12 per share, according to Thomson Reuters. The problem was that Nike reported narrower fiscal-first-quarter gross profit margin as well as higher costs for raw materials and labor.


Walgreen (WAG) reported that adjusted fiscal-fourth-quarter net income slipped to 63 cents a share from 66 cents in the year-earlier period but topped analysts' estimates of 55 cents a share. Sales decreased to $17.07 billion, from about $18 billion. Walgreen said it expects growth in the coming year as it re-enters the Express Scripts pharmacy provider network.


McDonald's (MCD) shares dropped after the fast-food chain was downgraded to "neutral" from "buy" at Janney Montgomery. The 12-month share-price estimate is $100.


Facebook (FB) announced a gifts program that is expected to help with monetization. The social network also integrated its service with the Dropbox file storage and sharing service.


Sony (SNE) agreed to put 50 billion yen, or about $644 million, into Olympus in exchange for an 11.4% stake, the companies said Friday. 

628Comments
Sep 28, 2012 9:38AM
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Question of the day:     Based on what's occurred after 4 years (8% UE, $6 trillion in more debt, 1.3% GDP growth, 47 million on food stamps, drop in household incomes, etc...), if you vote to re-elect Obama, are you putting the interests of your candidate and political party ahead of the interests of our country?
Sep 28, 2012 10:27AM
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A few of these comments are right on.  If this country keeps this President another 4 years, and the Democratic Party's thirst for spending taxpayer dollars continues, even in the light of overwhelming deficits, then the current conditions in Spain, Greece, and Portugal will be our future.  Instead of decreasing the public sector spending, which becomes an obligation for all taxpayers, Obama and most Democrats want to increase that sector and increase the size and scope of the federal government.  His jobs bill didn't promote private sector jobs, which are 70% of our economic engine; it was more public sector jobs to "jumpstart" the economy, which then add to the obligations of local, state and federal agencies.  This country needs to start it's austerity program now, or we'll be the United States of Greece sooner than you think.  And the answer is not to tax the higher incomes more and more; the answer is to broaden the tax base.  Just about every household should be paying something in federal taxes if we're to pull ourselves out of these projected deficits for years to come.  A successful economic recovery is the key, of course, but to maintain viability in economic upturns and downturns alike,  we can't continue to increase the public sector spending and entitlements that we see now.  Clearly the Romney path si the  better of the two choices we have right now.   
Sep 28, 2012 10:16AM
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"Romney isn't working.  He will soon start collecting unemployment insurance. "

Obama hasn't worked in 4 years. 
Sep 28, 2012 10:43AM
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Americans are being lied to about the state of our economy.............Obama is buying votes from the poor............BUT what will he do with the poor after the election, if he wins? What will Obama do with the economy after the election? I think if we re-elect him........it will boost his ego so much...........that the poor will be forgotten..........and American middle class will sink into the poor. I also think his campaign supporters will become very rich! Obama is untruthful!!  Go Romney!
Sep 28, 2012 10:26AM
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France has now imposed a top rate of 75% . Talk about  doubling down on socialism. Investment will dry up in that country their downward spiral will continue but at least their honest,Stupid but honest
Sep 28, 2012 12:07PM
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Let's not forget Frances pummeling of the "super rich" with a 75% spike in business taxes!!!


So much for France wanting businesses to hire/keep workers. 


Wonder what the countryside's going to look like with factories and buildings closed and up for sale over there...

 

Morons...

 

GO ROMNEY 2012!!!

 

Sep 28, 2012 10:17AM
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"Personal income also rose just 0.1%, and after accounting for inflation and taxes, income fell 0.3%. "

Ya!! That's progress....let's keep moving FORWARD!!!!!!!!!!!!!!!!!!!
Sep 28, 2012 10:27AM
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The keynsian people advocate government borrowing and money printing, claiming that it will pump up the economy. They say, we'll pay it back when the economy improves. But no matter how good the economy ever was, I've never seen them advocate paying any of it back. They always say, paying it back now will certainly cause a recession.
Sep 28, 2012 11:20AM
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If Obama gets re-elected........we will find out then how our Ambassador was killed, and what they are hiding.................but Obama will bounce around with more excuses as to why there was not more protection............Lets see now.....the poor being paid with cell phones, Americans not knowing what happened in Libya...............less unemployment but American business down.........government purchased home loans................are you kidding me..........Lies!!!!

 

Sounds pretty accurate to me.

Sep 28, 2012 10:31AM
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Spain needs 2 things to get its economy back on track. 1) A Recovery Summer version 3.12.     2) A good community organizer. Yep, that ought to fix her right up in a jiffy.
Sep 28, 2012 10:27AM
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"If you don't vote for Romney and do not have the same agenda as me you are not a american."

That might be what you thought when you read my post, I can control what's in your head, but that's not what I said at all. 

We all have one vote, and we choose who to give it to.  IMO, a politician should EARN our vote.  I don't see how Obama has earned anyone's vote based on his performance and the condition of America now that we are getting to the end of his first term.  That's all I said.
Sep 28, 2012 10:41AM
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We have wasted 5.8 trillion since the imbecile "57 States" has been in office that is 18,300/person or 73,200 per family!

If your family didn't get 73,200 from the government since Obama has been in office you  need to ask him WHY?  Where is your share?   And then ask yourself if you approve of who did get the money?

Well, did you get yours?
Sep 28, 2012 10:32AM
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The stock market is -100 at 10:30 AM. the excuse of the hour is because of Spain.  Don't worry.  The "mainstream media" tells us;  1)  Foreign policy is Urkel's forte;  2)  It is Friday ... the Fed will simply pump millions of devalued dollars into the market right before closing so foreigners will think the U.S.S.A. is solvent.

Sep 28, 2012 12:58PM
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Is Obama is your savior?  Folks in Germany thought Hitler was their savior.  All you whiners who talk about the rich getting richer and the poor getting poorer in regards to Romney - whoever said life was fair?  Whoever said it is a right to have what the rich have?  My friends, you have to earn  that.  Grant it, there are many folks who swindle the system, but for those who do become wealthy legitimately, good for them I say.

Time to stop the whining and work for what you want in life rather than wait for the freebies like so many of the people do now.

Sep 28, 2012 10:21AM
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"Job creators" expect to benefit from the fruits of their labor and risk.

Workers also expect to benefit from the fruits of their labor and time.


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The downward DEATH SPIRAL of Lost Jobs and an ever weaker and weaker economy continues for the USA

 

See how an infinite amount of monies from the central banks is not going to help the economic crisis around the world.

 

It's like this folks. The US economy is like a car wreck victim who's left arm got cut off in the crash.

The injection of infinite monies into the left arm merely flows out of the arm and onto the pavement. The monies does the person (e.g. the economy) no good. The Federal Reserve knows this their economists understand the truth and yet they do nothing to help the patient the US economy. Would a EMS crew hook up a blood transfusion to the cut off left arm or to the right arm of the car crash???

 

The solution to the USA economy is jobs and not pouring money into the hands of the super rich.

 

So what if the super rich get another $5 trillion dollars from the central banks once again this year.

 

IT DOES NOT HELP THE ECONOMY AS THE MONEY NEVER GETS TO THE PEOPLE WHO NEED IT.

 

Pretty much we are doomed. Either Geithner (the tax evading criminal who should be in jail and not running the IRS) or Bernanke are totally stupid or they are communist agents bent on destroying the USA. Or perhaps both.

 

It's about creating 40 million American jobs paying $120,000 a year folks. Anything less than that and we are doomed. By this time next year it will be 60 million new jobs in order to save the economy and after that pretty much you will have to crash the economy and trash the dollar and start all over with a new currency.

Sep 28, 2012 11:09AM
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No government handouts..................JOB CREATION............LOWER DEFICIT!! Go Romney! Wake up Americans before it is too late for your families!!!!
Sep 28, 2012 10:39AM
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Wake up people    it is  RECESSION TIME, like it or not,   double dip anyone ?
Sep 28, 2012 11:11AM
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Ragweed said;
" I see Pawlenty, Jindal and Shrek are setting up shop in Iowa already "

You, on the other hand have Harry "Rodent" Reed, and 
Joe "Somebody please cut out my tongue so there's more room for my foot" Biden......

Lest I forget; Barack " But I like wearing knee pads in the Middle east" Obama.....
Sep 28, 2012 10:29AM
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The headline should read  - Consumer spending UP,quality and amount of product bought, DOWN!
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