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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 tumbled Friday as investors around the world worried that the global economic slump may be worsening.
The Dow Jones industrials finished down 312 points, or 3.6%, to 8,379, its lowest close since April 2003. The Standard & Poor's 500 Index dropped 31 points, or 3.5% to 877, and the Nasdaq Composite Index gave up 52 points, or 3.2%, to 1,552.
The selling left many traders wary about what may occur next week. A big concern is how the markets will behave Monday after weekend spent mulling the situation.
The important question is whether the fears that battered Asian and European markets on Friday take over American markets, Art Cashin of UBS Financial Services told CNBC on Friday.
In addition, the Federal Open Market Committee, the Federal Reserve's rate-making body, will meet Tuesday and Wednesday and is expected to cut its key federal funds rate, the rate banks charge each other for overnight loans, to 1% from 1.5%, a rate set on Oct. 9.
There was some good news in the close. The Dow, S&P 500 and Nasdaq all dropped toward their intraday lows of Oct. 10, their lowest levels of the year. But none fell below its 2008 low -- a possible signal of support.
The sell-off was started when markets in Asia and then Europe slumped heavily in panic selling. The panic caused traders in futures based on the major U.S. stock indexes to push prices so low that trading was halted.
That left the Dow looking at opening down at least 550 points, with a possibility that circuit breakers -- designed to stabilize the market -- would kick in and halt trading. That never happened; in fact, the Dow's biggest intraday loss was nearly 504 points.
At the same time, oil prices crumbled despite a decision by the Organization of Petroleum Exporting Countries to cut production by 1.5 million barrels a day, about 4.7% of the cartel's output. Crude fell 5.4% to $64.15 a barrel in New York, its lowest close since May 2007 and down more than 56% from its July 11 high.
Forced selling by mutual funds facing redemptions and by hedge funds that had to liquidate holdings to meet margin calls were also big factors causing Friday's market slide.
The tumble also reflected investors' souring view of the economy. A new signal of the economy's weakness came Friday from Chrysler Group, which said it would start laying off 25% of its white-collar work force of 18,500.
For the week, the Dow finished down 5.4%, the S&P 500 down 6.8% and the Nasdaq down9.3%. The Dow is off 36.8% this year, with the S&P 500 down 40.3% and the Nasdaq down 41.5%.
| Close for week | Wk. ago close | % chg. | YTD. chg. | |
|---|---|---|---|---|
| Dow Jones industrials | 8,378.95 | 8,852.22 | -5.35% | -36.83% |
| S&P 500 | 876.77 | 940.55 | -6.78% | -40.29% |
| Nasdaq Composite | 1,552.03 | 1,711.29 | -9.31% | -41.48% |
| Russell 2000 | 471.12 | 526.43 | -10.51% | -38.50% |
| Crude oil per barrel | $64.15 | $71.85 | -10.72% | -33.16% |
| 10-yr. Treasury yield | 3.70% | 3.94% | -0.24% | -8.38% |
| Gold per troy ounce | $730.30 | $787.70 | -7.29% | -12.85% |
Are insurance companies the next problem area?
The government apparently thinks so. News reports said that the government is looking for ways to broaden its $700 billion bank rescue program to help insurance companies that are a critical backstop to a wide range of deals, bond issues and leasing arrangements.The Treasury Department is worried that insurance companies, many of which report earnings next week, could face similar fates as American International Group (AIG, news, msgs) as the credit crisis worsens, triggering a new wave of problems for the financial markets.
AIG nearly collapsed last month when it was overwhelmed by losses from real estate investments and derivatives, requiring massive government loans of more than $123 billion. It has already burned three-quarters of that money.
Treasury officials told The Washington Post on Friday that insurance companies organized as savings and loans are eligible to receive money from the government because they are regulated by the Office of Thrift Supervision. Treasury has formed a team to specifically examine mounting trouble within the insurance industry.
The Philadelphia KBW Insurance Index ($KIX) was up 1.2% on Friday, one of the two industry groups to show gains; the other was gold stocks. The insurance index is down 35% this month and 52.4% on the year.
Among the hardest hit: Hartford Financial Group (HIG, news, msgs), down 77% since May 2007. But the shares were up 16.2% to $24.30 on Friday, the biggest gain among S&P 500 stocks.
| Friday | Chg. from Oct. 10 low | Change from high | Date of high | |
|---|---|---|---|---|
| Dow Jones Industrial Average | 8,378.95 | 6.30% | -40.85% | Oct. 9, 2007 |
| S&P 500 Index | 876.77 | 4.31% | -43.98% | Oct. 9, 2007 |
| S&P 100 Index | 423.52 | 6.59% | -41.97% | Oct. 9, 2007 |
| Nasdaq Composite Index | 1,552.03 | 0.62% | -45.72% | Oct. 31, 2007 |
| Nasdaq-100 Index | 1,202.27 | 0.52% | -46.30% | Oct. 31, 2007 |
| S&P Midcap 400 Index | 501.53 | -1.03% | -45.32% | Oct. 9, 2007 |
| Russell 2000 Index | 471.12 | 0.68% | -44.95% | July 13, 2007 |
| Dow Jones Utilities Average | 353.70 | 20.14% | -36.01% | Dec. 10, 2007 |
| Dow Jones Transportation Average | 3,448.44 | 1.37% | -37.22% | June 5, 2008 |
| Nikkei 225 Index (Japan) | 7,649.08 | -5.75% | -56.19% | Oct. 11, 2007 |
| FTSE 100 Index (Britain) | 3,883.36 | 0.24% | -42.30% | Oct. 12, 2007 |
| Dax Index (Germany) | 4,295.67 | -0.29% | -46.58% | Oct. 12, 2007 |
Financials, energy lead markets lower
All of the 30 Dow stocks finished lower on the day. The best performers were Intel (INTC, news, msgs) and Microsoft (MSFT, news, msgs), down 1.6% each to $14.28 and $21.96, respectively. In addition, 437 S&P 500 stocks were lower, along with 84 Nasdaq-100 ($NDX.X) stocks. The index was down 37 points, or 3%, to 1,202.Financial and energy shares were the worst performers of the overall market. The Select Sector SPDR-Financial (XLF, news, msgs) exchange-traded fund was down 6.5% to $13.55.
Bank of America (BAC, news, msgs) and Citigroup (C, news, msgs) were the weakest performers among the 30 Dow stock and S&P 500 stocks, falling 8.4% to $21.07 and 7.4% to $12.14, respectively.
Meanwhile, troubled banking company National City (NCC, news, msgs) agreed to sell out to PNC Financial for $2.23 a share, or $5.2 billion in stock. PNC will use the government's rescue plan to help finance the deal. The deal is hardly beneficial to National City shareholders, and the shares fell 24.7% to $2.07.
Thirty-six of 39 stocks in the energy sector of the S&P 500 were lower on the day. The Select Sector SPDR-Energy (XLE, news, msgs) exchange-traded fund, which tracks the energy sector, was down 6.2% to $43.65. The ETF fell 5% this week. ExxonMobil (XOM, news, msgs) dropped 1.9% to $69.04, and ConocoPhillips (COP, news, msgs) fell 5.9% to $48.45.
Crude's drop has cut the national retail price of gasoline to $2.781, lower than the national average of a year ago, according to AAA's Fuel Gauge report. Friday's price is down a penny from Thursday and down 32% from its July 11 peak of $4.114 a gallon.
General Motors (GM, news, msgs) finished down 2.5% to $5.95; it had been down as much as 17% in Friday morning after Toyota Motor (TM, news, msgs) reported its first sales decline in seven years. Toyota was down 4.2% to $66.09 in New York.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $64.15 | $67.84 | -$3.69 | -36.26% | -33.16% |
| Heating oil (per gallon) | $1.9465 | $2.0297 | -$0.0832 | -32.00% | -26.53% |
| Natural gas (per million BTU) | $6.2390 | $6.4190 | -$0.1800 | -16.12% | -16.62% |
| Unleaded gasoline (per gallon) | $1.4779 | $1.5778 | -$0.0999 | -40.52% | -40.67% |
Coming up next week
Not only does the Fed meet Tuesday and Wednesday, but there are important reports on new-home sales on Monday and personal income and spending on Friday.In addition, some 2,400 companies will report earnings next week. A number will attract a great deal of attention, including:
- Oil companies: ExxonMobil, Apache (APA, news, msgs) and Royal Dutch Shell (RDS.A, news, msgs) on Thursday; Chevron on Friday.
- Insurance companies: Aetna (AET, news, msgs), MetLife (MET, news, msgs) and Hartford Financial Services, all on Wednesday.
- Consumer products: Procter & Gamble (PG, news, msgs)on Wednesday; Unilever (UL, news, msgs), which comes on Thursday.
Lastly, the last-minute campaigning ahead of the Nov. 4 election will intensify.
Markets see U.S. woes spreading
The selling in just about all major markets worldwide reflected worries that the U.S. economic slowdown is spreading around the globe. If a market didn't fall, it wasn't open.In Asia on Friday, major indexes hit record lows as investors fled the equities markets and grabbed for government paper. The Nikkei 225 Index ($N225) closed down 9.6%, falling to 7,649, a level not seen since April 2003. The MSCI Asia Pacific Index fell 9.5%, remaining at levels last seen in 2004 for the second day in a row.
In Europe, the Dow Jones Stoxx 600 Index fell below 200 for the first time in more than five years as it shed 9% to 190. The FTSE 100 Index ($GB:UKX) was off 5% to 3,883.
"All bets are off," says David Jones, the chief market strategist at London brokerage IG Index. Jones says there's no telling how low the markets may fall. "We thought we'd seen the worst, but we haven't, and there's no telling how long the sell-off may continue."
Existing-home sales tick up
One glimmer of hope on Friday: Existing-home sales jumped to a 5.18 million annual rate, a 5.5% increase from August's unrevised 4.91 million annual pace, the National Association of Realtors said Friday.Though the sales levels are still deeply depressed from 2006 highs, the uptick shows that buyers are taking advantage of lower prices in many markets, especially in the West.
The median home price was $191,600 in September, the lowest level since April 2004 and down 9% from $210,500 a year ago. The median price in August was $203,100.
Southern California saw sales jump 65% from a year ago as prices fell 30% or more from a year ago. Most of those sales were of homes taken back by lenders in foreclosures.
Based on the sales rate, the inventory of unsold homes dropped to a 9.9-month supply, down from the 10.6-month supply seen in August.
Home building stocks moved higher on the report. Pulte Homes (PHM, news, msgs) was up 4.8% to $8.50.
Warnings from Microsoft, Sony
Microsoft's fiscal first-quarter sales and profits slightly beat Wall Street's expectations. But the world's biggest software company lowered its revenue and profit forecasts into 2009, citing a slowdown in software sales.But the stock was holding its own in the face of Friday's selling because the guidance cut was relatively modest.
Microsoft said its Windows business weakened in the quarter, growing by just 2%, compared with a 4% increase in the year-earlier period. Analysts said the figures show that corporations haven't upgraded their PCs to the Windows Vista operating system as quickly as in past product cycles.
Microsoft delivered strong growth of 20% in sales of business software. And sales of its Xbox 360 video-game consoles also exceeded expectations. Microsoft shares had been down more than 6% at the open but had inched up 15 cents to $22.47 in the afternoon before falling back at the close.
Sony (SNE, news, msgs) on Thursday sharply lowered its outlook for its fiscal year ending March 30, citing a weakening global economy and a stronger yen.
The yen surged to a 13-year high Friday, a huge blow to Sony and other Japanese exporters -- darkening earnings prospects for the nation's big exporters and threatening to drag Japan into a recession.
Sony vowed to eliminate jobs, close plants and postpone some capital spending to bolster its balance sheet. Sony shares on the New York Stock Exchange were down 7.6% to $19.82.
Xerox sets job cuts
Copier giant Xerox (XRX, news, msgs) on Thursday said it would cut 5% of its work force, or about 3,000 jobs, and take a $400 million charge in a bid to boost profit next year.Xerox had already been steadily cutting costs and jobs before the financial crisis dramatically worsened in recent weeks. It has eliminated 8,800 jobs since 2005, including 1,500 so far this year.
The company said it plans to cut another 3,000 jobs, or 5% of its work force, because a slowdown in orders from large U.S. companies has dragged down profits. Xerox shares were off 5.8% to $7.26 in late-morning trading.
Earnings from Fortune Brands, Samsung, Gannett, Ingersoll Rand
Other earnings reports:- Fortune Brands (FO, news, msgs) reported third-quarter earnings at $1.11 per share, slightly ahead of analyst estimates, but revenue disappointed at $1.92 billion. Fortune Brands makes consumer products, including alcoholic beverages Sauza, Jim Beam and Makers Mark, as well as home products and golf equipment. Goldman Sachs analyst Lindsay Mann thinks that the company may get some boost from consumers opting for cheaper brands. But sales going forward will climb about 1% to 2%. It had projected growth of 2% to 3%. The stock was up 0.8% to $35.12.
- Chip maker Samsung reported a 44% drop in third-quarter profit on revenue of $863 million. The chip maker warned that sales and prices are being hurt by the decline in consumer electronics sales in a slowing economy.
- Gannett (GCI, news, msgs) reported third-quarter earnings of 69 cents a share on revenue of $1.64 billion -- slightly below analyst expectations. Profits fell 32%. Revenue fell 9% to $1.6 billion. Classified ad revenue fell 28.5%, with retail classified revenue falling 41.5%. Analysts say the newspaper chain's financial position is healthy -- for now. Shares fell 1.8% to $9.47.
- Ingersoll Rand (IR, news, msgs) earned 92 cents a share on revenue of $4.31 billion. Both were below analyst estimates. But the company had warned earnings would be lower because of weakness in its North American and European businesses.The company's customers are cutting spending on equipment purchases. Shares dropped 5.9% to $17.07.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 0.820% | 0.910% | -0.090 | -8.89% | -73.89% |
| 5-year Treasury note yield | 2.603% | 2.523% | 0.080 | -12.83% | -24.66% |
| 10-year Treasury note yield | 3.697% | 3.534% | 0.163 | -3.40% | -8.38% |
| 30-year Treasury bond yield | 4.087% | 3.969% | 0.118 | -5.06% | -8.34% |
| Currencies | |||||
| U.S. Dollar Index | 86.950 | 85.790 | 1.160 | 9.56% | 13.37% |
| British pound in dollars | $1.5926 | $1.6316 | -0.0390 | -10.65% | -19.94% |
| Dollar in British pounds | £0.6279 | £0.6129 | 0.0150 | 11.93% | 24.91% |
| Euro in dollars | $1.2653 | $1.2982 | -0.0329 | -10.26% | -13.43% |
| Dollar in euros | € 0.7903 | € 0.7703 | 0.0200 | 11.44% | 15.51% |
| Dollar in yen | 94.29 | 97.96 | -3.67 | -11.07% | -15.70% |
| Canadian dollar in U.S. dollars | $0.783 | $0.804 | -$0.0211 | -16.78% | -21.16% |
| U.S. dollar in Canadian dollars | $1.278 | $1.244 | $0.0345 | 20.19% | 26.86% |
| Commodities | |||||
| Gold | $730.30 | $714.70 | $15.60 | -17.09% | -12.85% |
| Copper | $1.6865 | $1.8045 | -$0.12 | -41.42% | -44.54% |
| Silver | $9.2950 | $9.5000 | -$0.21 | -24.28% | -37.70% |
| Corn | $3.7275 | $3.9025 | -$0.18 | -23.54% | -18.17% |
| Crude oil (NYMEX) (per barrel) | $64.15 | $67.84 | -$3.69 | -36.26% | -33.16% |
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