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| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.633720 |
| Euro to US Dollar | 1.398406 |
| Japanese Yen to US Dollar | 0.010414 |
| Canadian Dollar to US Dollar | 0.861846 |
The stock market ended the first three days of 2008 badly on Friday, leaving traders to wonder how much more turmoil lies ahead.
The short answer seems to be that stocks will be weak, although there could be a short-term rebound next week. The overriding problem is that many investors now sense that a slowing economy will hit corporate profits and stock prices.
A surprisingly weak report on payroll growth set off a big sell-off Friday morning that sent the Dow Jones industrials down nearly 257 points, or 2%, to 12,800. It was the blue-chip index's worst point and percentage losses since Nov. 7, 2007.
The Nasdaq Composite Index was off a whopping 98 points, or 3.8%, to 2,505. It was the worst point loss for the index since Sept. 17, 2001, the first day of trading after the Sept. 11, 2001, terror attacks. The percentage loss was the largest since Feb. 27, 2007, when the index fell 3.86%.
The Standard & Poor's 500 Index was down 36 points, or 2.5%, to 1,412, its worst point and percentage losses since Dec. 11, 2007.
For the first three days of January, the Dow was down 464 points, or 3.5%. The S&P 500 tumbled nearly 57 points, or 3.9%, and the Nasdaq slid nearly 148 points or 5.6%.
The selling was exacerbated by a downgrade of chip giant Intel (INTC, news, msgs) -- its second downgrade of the week. The stock slumped 8.1% to $22.67 on the day and finished the week with a 15% loss. Intel caused investors to crush the Philadelphia Semiconductor Index ($SOX.X), which was down 4.7%, to 373.
But the battering that techs took on Friday wasn't limited to chip stocks. Apple (AAPL, news, msgs) fell 7.6% to $180.05. Google (GOOG, news, msgs) was off 4.1% to $657, and Research In Motion (RIMM, news, msgs), the maker of the BlackBerry mobile device, fell 8.4% to $103.35.
"Cold fear is driving the market," James Maguire, a floor broker with LaBranche & Co., said on CNBC on Friday afternoon.
The Labor Department reported Friday that nonfarm payrolls rose by a mere 18,000 in December 2007, far fewer than economists had expected. It was the weakest month-to-month change since August 2003. The U.S. unemployment rate jumped to 5%.
- Video: An ugly jobs report
The jobs report told Wall Street that the U.S. economy is clearly slowing. It may slip into a recession, defined as two consecutive quarters of negative economic growth. But the practical effect will be slow housing sales and slowing consumer spending overall as the year wears on. Corporate profits are likely to fall, and investors will see analysts cutting earnings estimates in the next few weeks.
The fourth-quarter earnings season starts Wednesday when Alcoa (AA, news, msgs) reports its profits.
So the question for investors is whether to look for opportunities in overseas markets, especially emerging markets which far out-performed U.S. markets in 2007, or simply wait for the market to bottom.
| Close for week | Wk. ago close | % chg. | YTD. chg. | |
|---|---|---|---|---|
| Dow Jones industrials | 12,800.18 | 13,365.87 | -4.23% | -3.50% |
| S&P 500 | 1,411.63 | 1,478.49 | -4.52% | -3.86% |
| Nasdaq Composite | 2,504.65 | 2,674.46 | -6.35% | -5.57% |
| Russell 2000 | 721.60 | 771.76 | -6.50% | -5.80% |
| Crude oil per barrel | $97.91 | $96.00 | 1.99% | 1.99% |
| 10-yr. Treasury yield | 3.85% | 4.10% | -5.91% | -4.49% |
| Gold per troy ounce | $865.70 | $842.70 | 2.73% | 3.31% |
Just a bad, bad day
There was little to cheer about on Friday, except lower oil and gold prices. Crude oil closed down 1.3% to $97.91 after crossing $100 a barrel on two days this week. Gold was down $3.50 on Friday to $865.70 an ounce.The S&P 500 fell through 1,420, an important support level. For technicians who follow charts, this was a troubling development because it suggests the index has farther to fall.
There were more than 400 stocks on the New York Stock Exchange hitting new 52-week lows, a level last seen when the market bottomed in 2003.
For the week, the Dow fell 4.23%, its worst weekly loss over the last year. The S&P 500 was off 4.2% on the week, and the Nasdaq finished the week down nearly 6%.
The Dow and S&P finished Friday down 9.6% and 9.8%, respectively, from their all-time closing highs on Oct. 9. The Nasdaq is down 12.4% from its peak on Oct. 31.
And the pressure will build on the Federal Reserve to cut rates at its Jan. 30-31 meeting. In fact, the Fed announced Friday that it will conduct two $30 billion credit auctions later this month.
Only two of the 30 Dow stocks were higher -- and Citigroup (C, news, msgs), up 9 cents to $29.02, and Coca-Cola (KO, news, msgs), up 12 cents to $61.85. Only 29 S&P 500 stocks and four Nasdaq-100 ($NDX.X) stocks showed gains.
FPL Group (FPL, news, msgs), the Florida power company, was the S&P 500 leader, up 2.8% to $68.82. The Nasdaq-100 was led by United Airlines parent UAL (UAUA, news, msgs), up 4.4% to $33.15.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $97.91 | $99.18 | -$1.27 | 1.99% | 1.99% |
| Heating oil (per gallon) | $2.6835 | $2.7191 | -$0.0356 | 1.76% | 1.76% |
| Natural gas (per million BTU) | $7.8410 | $7.6740 | $0.1670 | 6.16% | 6.16% |
| Unleaded gasoline (per gallon) | $2.5111 | $2.5414 | -$0.0303 | 2.09% | 2.09% |
Is the jobs report a recession signal?
The consensus estimate was for the Labor Department to report a gain of 58,000 jobs last month, although analysts' estimates had ranged broadly, with some reaching as high as 85,000 new jobs.Nonfarm payrolls were revised upward to a gain of 115,000 in November from a previous reading of a gain of 94,000.
The unemployment rate jumped to 5%, up from the 4.7% in November, and up from 4.4% in December 2006. "These jobs data are the strongest evidence so far that the economic expansion is grinding to a halt," Peter Morici, an economist at the University of Maryland School of Business, wrote in a note to clients this morning.
"Slow jobs growth, along with the shortages of mortgage and business credit, declining home prices and residential construction, and falling industrial production, indicate the risk of a recession for 2008 is high," Morici continued.
Morici expects the Fed to "aggressively cut interest rates to combat the U.S. slowdown," but he warns that "the Federal Reserve is in crisis, because its mix of policies addresses an old-style recession."
The Fed's federal funds rate, the rate banks charge each other for overnight loans, is 4.25% now. The futures markets see a cut to 4% as a certainty when the Fed's Federal Open Market Committee meets on Jan. 30-31. And there's at least a 30% chance the rate cut will be bigger than that.
Goldman Sachs predicted a cut to 3.75% on Jan. 31, with three more cuts after that of 0.25% each, Briefing.com reported.
Intel slammed by downgrade
Intel shares tumbled Friday after the chip giant was downgraded to "neutral" from "overweight" at JPMorgan Chase (JPM, news, msgs) this morning.The analyst said Intel suffered from a slowdown in orders in the fourth quarter.
On Wednesday, Bank of America Securities slapped the whole chip sector with downgrades, hitting shares of Intel as well as Advanced Micro Devices (AMD, news, msgs) and National Semiconductor (NSM, news, msgs).
AMD shares fell 7.7% to $6.25 on Friday; National Semi dropped 2.3% to $21.04.
Intel was the worst-performing stock among the 30 Dow stocks and the stocks in the Nasdaq-100 Index. It was also the eighth-worst performer among S&P 500 stocks.
Intel not participating in 'One Laptop Per Child'
Separately, the chip-making giant early this morning said it will no longer participate in the nonprofit "One Laptop Per Child" project because of a disagreement with the organization's founder, Nicholas Negroponte.Negroponte had wanted Intel's XO personal computer to be the exclusive computer for the project, while Intel would rather offer "many solutions" to emerging markets, Intel spokesman Chuck Malloy said.
Intel's own inexpensive laptop, called Classmate, is being marketed in the same emerging-market countries where the nonprofit is working.
"OLPC had asked Intel to end our support for non-OLPC platforms, including the Classmate PC, and to focus on the OLPC platform exclusively," Malloy said in a statement. "At the end of the day, we decided we couldn't accommodate that request."
A cold shoulder for Wendy's Frosty
Fast-food chain Wendy's (WEN, news, msgs) said Friday that fourth-quarter sales at stores open at least one year fell 0.8% from the same period in 2006.Shares of Wendy's -- home of the square burger and the Frosty frozen dessert -- fell 6.1% to $23.34.
U.S. franchised restaurants saw a 0.2% increase in same-store sales.
Wendy's has been in the spotlight lately, after Nelson Peltz's Triarc (TRY, news, msgs) made a lower-than-expected buyout offer for the company. Peltz, who is chairman of Arby's franchiser Triarc, is a major investor in Wendy's.
Bed Bath & Beyond warning
Shares of Bed Bath & Beyond (BBBY, news, msgs) fell 4.4% to $26.19 Friday, after the company late Thursday issued a profit warning for 2007.The housewares retailer said it expects fiscal full-year earnings to be between $2.08 and $2.11 per share, well below the consensus estimate of $2.20 per share. The company also warned that fiscal-fourth-quarter earnings would fall short of Wall Street's estimate. Bed Bath & Beyond expects 64 to 67 cents per share; analysts were looking for 78 cents per share.
"For a company like Bed Bath, which has been able to beat on such a consistent basis, to have misses, that's unusual and a sign of weakness in home furnishings," Laura Champine, an analyst with Morgan Keegan, told Bloomberg News.
More from MSN Money
The company will report fiscal-fourth-quarter and full-year earnings in early April.
Number of bankruptcies jumps in '07
The number of Americans who filed for bankruptcy in 2007 soared 40%, according to the American Bankruptcy Institute.Last year, 801,840 consumers filed for bankruptcy, up from 573,203 in 2006.
- Video: Getting a mortgage today
The mortgage-market meltdown contributed to last year's increase, and filings may well increase in 2008, ABI Executive Director Samuel Gerdano said.
Stock spammer is indicted
The U.S. attorney for the Eastern District of Michigan indicted Adam Ralsky late Thursday on charges of manipulating stock prices.The indictment charges that Ralsky sent millions of e-mails to people around the globe in an effort to inflate the prices of Chinese penny stocks, The Associated Press said.
The 52-year-old Ralsky and seven of the 11 named defendants remain at large, AP reported. The defendants are charged with mail and wire fraud, which could mean jail sentences of 20 years if they are found guilty.
Ralsky has been under investigation for at least two years. Agents raided his West Bloomfield, Mich., home in September 2005 and seized computer equipment and financial records. Ralsky made about $3 million in the ruse in the summer of 2005 alone, according to U.S. Attorney Stephen Murphy.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 3.115% | 3.150% | -0.035 | -1.11% | -1.11% |
| 5-year Treasury note yield | 3.169% | 3.264% | -0.095 | -2.91% | -2.91% |
| 10-year Treasury note yield | 3.854% | 3.901% | -0.047 | -1.20% | -1.20% |
| 30-year Treasury bond yield | 4.359% | 4.369% | -0.010 | -0.23% | -0.23% |
| Currencies | |||||
| U.S. Dollar Index | 75.830 | 75.950 | -0.120 | -0.53% | -0.53% |
| British pound in U.S. dollars | $1.9751 | $1.9732 | 0.0019 | -0.61% | -0.61% |
| U.S. dollar in British pounds | £0.5063 | £0.5068 | -0.0005 | 0.62% | 0.62% |
| Euro in U.S. dollars | 1.4749 | 1.4749 | 0.0000 | 1.06% | 1.06% |
| U.S. dollar in euros | € 0.6780 | € 0.6780 | 0.0000 | -1.05% | -1.05% |
| U.S. dollar in yen | ¥108.58 | ¥109.48 | -0.90 | -2.77% | -2.77% |
| U.S. dollar in Canadian dollars | $1.002 | $0.988 | 0.014 | 0.49% | 0.49% |
| Canadian dollar in U.S. dollars | $0.998 | $1.012 | -0.014 | -0.42% | -0.42% |
| Commodities | |||||
| Gold | $865.70 | $869.10 | -$3.40 | 3.31% | 3.31% |
| Copper | $3.1575 | $3.1880 | -$0.031 | 2.78% | 2.78% |
| Silver | $15.4620 | $15.4620 | -$0.04 | 3.81% | 3.81% |
| Crude oil (NYMEX) (per barrel) | $97.91 | $99.18 | -$1.27 | 1.99% | 1.99% |
By Charley Blaine and Elizabeth Strott
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