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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 |
Stocks sustained their worst losses since late June and fell back to bear market territory today on worries about job security, slowing economies around the world, weakening financial companies and falling commodity prices.
The Dow Jones industrials fell 345 points, or 3%, to 11,188. The Standard & Poor's 500 Index was down 38 points, or 3%, to 1,237, and the Nasdaq Composite Index tumbled 75 points, or 3.2%, to 2,259.
The losses were the worst for all three indexes since June 26, when the Dow fell 358 points. Today’s drop was the fourth-worst loss of the year for the Dow and the blue-chip index's sixth loss of 300 points or more for the year.
Moreover, the Dow, S&P 500 and Nasdaq finished the day down about 21% each from their all-time highs in October. A loss of 20% from a top is the popular definition of a bear market.
Traders will remain on edge at least until Friday morning, when the Labor Department reports on nonfarm payrolls for August. Many economists are expecting the government to report a decline of 70,000 jobs as the economy weakens.
September historically is the weakest month of the year for stocks and, so far, the month is living up to its reputation, with the major averages down about 3% on the week.
Today's slump was big and broad. Only one of the 30 Dow stocks were higher -- Coca-Cola (KO, news, msgs), which was up 5 cents to $51.71. Wal-Mart Stores (WMT, news, msgs) was the leader for most of the day but ended down a penny to $59.78. The loser was Bank of America (BAC, news, msgs), down 7.2% to $30.60.
Only 22 S&P 500 stocks were showing gains, along with six stocks in the Nasdaq-100 Index ($NDX.X). Apple (AAPL, news, msgs), down 3.4% to $161.22, and Research In Motion (RIMM, news, msgs), down 6.4% to $107.49, subtracted nearly 13 points from the index, which was down 3.2% to 1,775.
The market looks like it will test its lows reached in July. In fact, the NYSE Composite Index ($NYA.X) fell to 8,004 today, down 261 points, or 3.2%, on the day and more than 80 points below its intraday low of 8,089 on July 15.
In addition, semiconductors slumped today, with the Philadelphia Semiconductor Index ($SOX.X) closing at levels last seen in April 2003.
The S&P 500 is only 36 points above its July low, the Dow 359 points above its low and the Nasdaq up just 90 points above its low.
Here's more on what blew up the market:
- A weakening jobs picture. Initial jobless claims rose by 15,000 last week to a seasonally adjusted 444,000 rate -- more than economists had predicted. Most economists believe that a jobless-claims figure above 400,000 indicates weakness in the economy. The number of Americans collecting jobless benefits rose to 3.44 million in the week ending Aug. 23, the highest level since November 2003. Apprehension is high that Friday's payrolls report will be especially weak.
- Merrill Lynch. Shares of investment house Merrill Lynch (MER, news, msgs) were down 7.5% to $26.21 on reports that negotiations to sell bad debt to Korea Asset Management were foundering. Financial stocks generally pushed lower. The Select Sector SPDR-Financial (XLF, news, msgs) exchange-traded fund was down 4.9% to $20.98.
- The Bill Gross factor. Pimco's legendary bond fund manager told CNBC today that his firm won't buy any securities sold by financial institutions to raise capital right now. At the same time, he thinks health of the financial sector of the economy is terribly weak. To halt what he called "a financial tsunami," he added, the U.S. government should give the Treasury the right to buy debt and other assets. Atticus Capital, a large hedge fund, pointedly denied that it was shutting down, The Wall Street Journal reported.
- The continuing sell-off in commodity stocks. The sell-off reflects the decline in prices for oil, copper, silver, gold and grains. Freeport-McMoRan Copper & Gold (FCX, news, msgs) was off 6.8% to $74.93. Fertilizer maker Potash of Saskatchewan (POT, news, msgs) was off 3.3% to $150.39. U.S. Steel (X, news, msgs) tumbled 5.1% to $112.67.
- Continued stress in housing. Housing starts have been bad, and earnings reports from Hovnanian Enterprises (HOV, news, msgs) and Toll Bros. (TOL, news, msgs), two of the biggest homebuilding companies, suggest that the bottom in the housing market isn’t yet at hand.
- Weak retail sales. While Wal-Mart had a decent report on August sales, the rest of the picture was not so pretty. The Standard & Poor's Retail Index ($RLX.X) was down 3.1% to 401 today.
| Today | Change from closing peak | Date of peak | |
|---|---|---|---|
| Dow Jones Industrial Average | 11,188.23 | -21.01% | Oct. 9, 2007 |
| S&P 500 Index | 1,236.83 | -20.98% | Oct. 9, 2007 |
| S&P 100 Index | 571.42 | -21.70% | Oct. 9, 2007 |
| Nasdaq Composite Index | 2,259.04 | -20.99% | Oct. 31, 2007 |
| Nasdaq-100 Index | 1,774.78 | -20.73% | Oct. 31, 2007 |
| S&P Midcap 400 Index | 782.76 | -14.66% | Oct. 9, 2007 |
| Russell 2000 Index | 718.62 | -16.03% | July 13, 2007 |
| Dow Jones Utilities Average | 457.11 | -17.30% | Dec. 10, 2007 |
| Dow Jones Transportation Average | 4,915.61 | -10.51% | June 5, 2008 |
| Nikkei 225 Index (Japan) | 12,557.66 | -28.07% | Oct. 11, 2007 |
| FTSE 100 Index (Britain) | 5,362.10 | -20.33% | Oct. 12, 2007 |
| Dax Index (Germany) | 6,279.57 | -21.91% | Oct. 12, 2007 |
No relief on the jobs picture
There was additional jobs news out this morning: Automatic Data Processing's unemployment report showed a decline of 33,000 jobs in August. Economists had predicted ADP to show a loss of 25,000 jobs.If the government's report on Friday shows job losses in August, it would be the eighth consecutive month of a shrinking U.S. work force. The ADP report counts only private-sector jobs, while the Labor Department's includes government payrolls.
In separate economic news, the Institute of Supply Management's service index came in at 50.6 in August, up from 49.5 in July -- and above economists' expectations for a 49.5 reading. Readings above 50 indicate expansion in the sector.
Meanwhile, second-quarter nonfarm productivity was revised higher this morning, up to a 4.3% annual rate from a previous reading of 2.2%. Unit labor costs, a gauge of inflation, fell 0.5%, revised lower from a previous gain of 1.3%.
"Higher productivity permits businesses to better absorb increases in wages and benefit costs, and have something left over to help cover higher material costs," Peter Morici, professor of economics at the University of Maryland, wrote in a note today. "Higher productivity should ease Federal Reserve fears about inflation and cause it to keep interest rates steady."
| Thur. | Wed. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $107.89 | $109.35 | -$1.46 | -6.56% | 12.41% |
| Heating oil (per gallon) | $3.0237 | $3.0788 | -$0.0551 | -4.97% | 14.13% |
| Natural gas (per million BTU) | $7.3220 | $7.2640 | $0.0580 | -7.82% | -2.15% |
| Unleaded gasoline (per gallon) | $2.7404 | $2.7668 | -$0.0264 | -8.95% | 10.02% |
Boeing machinists prepare to strike
Boeing (BA, news, msgs) shares were down 4.6% to $63.03 after the aircraft maker's machinists approved a strike. The stock’s drop subtracted 26 points from the Dow.The International Association of Machinists said that 87% of its members voted to strike after rejecting a contract offer of an 11% raise over three years and a $2,500 signing bonus. The IAM did, however, delay the strike by 48 hours in case last-ditch efforts solved the crisis.
"We've got to keep talking to see if the gap can be narrowed," said Doug Kight, Boeing vice president and lead negotiator. "Our job at this time is to listen to the union."
A strike would be the seventh by the IAM in 73 years; the most recent strike was called in 2005 and lasted four weeks. A labor action would cost Boeing $100 million a day in lost revenue, according to CNBC.
Sales jump at Wal-Mart, not so good elsewhere
Recession or no recession, shoppers are still showing up at Wal-Mart.The retail giant this morning said August sales at stores open at least one year rose 3%, excluding fuel, an increase well above the consensus estimate of a 1.6% gain. Wal-Mart had forecast August sales to rise between 1% and 2%.
Looking forward, the company said that comparable-store sales, excluding fuel, will increase between 2% and 3% in September.
But while Wal-Mart has had success pitching bargains to consumers anxious about a recession, other retailers have struggled. Overall, same-store sales are expected to rise 2% in August, according to an estimate from the International Council of Shopping Centers. That would be lower than the 2.9% growth rate seen in August 2007.
"You'll see a compressed back-to-school shopping season this year, with consumers waiting until they have to spend . . . and waiting for the best prices," retail analyst Patrick McKeever of MKM Partners, told Bloomberg Television.
Nordstrom (JWN, news, msgs) this morning said same-store sales fell 7.9% last month; Limited Brands (LTD, news, msgs) said August sales were down 7%. Both fell more than economists had expected. Nordstrom was off 4% to $31.99; Limited was off 6.2% to $20.70.
Target (TGT, news, msgs) said sales fell 2.1%, better than the consensus estimate of a 2.6% drop, while Costco Wholesale's (COST, news, msgs) sales jumped 9%, shy of analysts' expectations of a 9.9% increase.
Target was off 2.2% to $53.83; Costco shed 1.4% to $67.36.
Homebuilders report losses
Meanwhile, the housing sector -- source of the current weakness in the economy -- has a way to go before any real recovery, it seems.Hovnanian late Wednesday said its fiscal-third-quarter loss was $202.5 million, or $2.67 per share, more than double last year's loss of $80.5 million, or $1.27 per share. Analysts had been expecting a loss of $1.68 per share.
Stock Charts (Year)
Hovnanian
Toll Bros.
Hovnanian wasn't all gloom and doom, however. "The recently enacted $7,500 federal tax credit for first-time homebuyers should help spur some short-term demand," he said in a statement.
That wasn't enough to lift the stock: Hovnanian shares fell 17.4% to $6.40.
Toll Bros. also had a bleak quarter, losing $29.3 million, or 18 cents per share, better than the 25-cents-per-share loss analysts expected but reversing its year-ago results of $26.5 million, or 16 cents per share.
Toll Bros. shares rose 1.1% to $25.07. But the gain was rare among builder stocks. The Philadelphia Housing Sector Index ($HGX.X) was down 4.7% to 127.
| Thur. | Wed. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 1.650% | 1.665% | -0.015 | -2.37% | -47.45% |
| 5-year Treasury note yield | 2.876% | 2.940% | -0.064 | -6.90% | -16.76% |
| 10-year Treasury note yield | 3.643% | 3.697% | -0.054 | -4.46% | -9.71% |
| 30-year Treasury bond yield | 4.281% | 4.318% | -0.037 | -2.97% | -3.99% |
| Currencies | |||||
| U.S. Dollar Index | 78.685 | 78.165 | 0.520 | 1.53% | 2.59% |
| British pound in dollars | $1.7665 | $1.7759 | -0.0094 | -3.02% | -11.20% |
| Dollar in British pounds | £0.5661 | £0.5631 | 0.0030 | 3.11% | 12.61% |
| Euro in dollars | $1.4278 | $1.4495 | -0.0217 | -2.70% | -2.31% |
| Dollar in euros | € 0.7004 | € 0.6899 | 0.0105 | 2.77% | 2.37% |
| Dollar in yen | 107.16 | 108.21 | -1.05 | -1.48% | -4.19% |
| Canadian dollar in U.S. dollars | $0.935 | $0.943 | -$0.0078 | -0.59% | -5.84% |
| U.S. dollar in Canadian dollars | $1.070 | $1.061 | $0.0091 | 0.55% | 6.16% |
| Commodities | |||||
| Gold | $803.20 | $808.20 | -$5.00 | -3.83% | -4.15% |
| Copper | $3.2660 | $3.3120 | -$0.05 | -3.57% | 7.40% |
| Silver | $12.9400 | $12.9470 | -$0.01 | -5.60% | -13.27% |
| Corn | $5.4925 | $5.4650 | $0.03 | -3.34% | 20.58% |
| Crude oil (NYMEX) (per barrel) | $107.89 | $109.35 | -$1.46 | -6.56% | 12.41% |
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