Stock market and economic outlook: Two turkeys
Here's the 2011 Thanksgiving recipe that all investors are sampling today: start with a fractured European Union buckling under the weight of sovereign debt; add in slowing growth in China and the US; and garnish with a light volume, pre-holiday trading session. Let simmer for two hours and you will soon be feasting on global stock market losses.
Before US markets opened, the Europe Stoxx 600 lost 0.76% and the Hang Seng dropped 2.1 percent. Those results set the table for pre-Thanksgiving markets -- gobble, gobble!:
-- DJIA: 11,257 down 236, or 2% (52-week low: 10,604 on 8/9/11)
-- S&P 500: 1,161, down 26 or 2.2% (52-week low: 1,101 on 8/9/11)
-- NASDAQ 2,460, down 61, or 2.4% (52-week low: 2,316 on 9/23/10)
-- January Crude Oil: $96.17, down $1.84, or 1.8%
-- December Gold: $1,695.90, down $6.50, or 0.4%
Here are some of the specific ingredients that have comprised this (so far) rotten dish:
Consumer spending slowed in October, which is not a great way to enter
the all-important fourth quarter. The Commerce Department said incomes
rose 0.4 percent, but spending was up by only 0.1 percent, a
significant pull-back after last quarter's robust spending results. (Silver lining: If Americans are spending less and saving more, at least personal balance sheets will start to look better.)
The U.S. government's second estimate of third quarter economic growth (GDP) was revised down to 2 percent from the preliminary estimate of 2.5 percent. For the year, we are running at less than two percent growth, which is not nearly strong enough to propel job creation.
Weak GDP is another blow to economy
Durable goods (items intended to last more than three years) orders fell 0.7 percent. While the drop was expected, the surprise was a downward revision to the previous month. Additionally, new orders for non-defense capital goods excluding aircraft fell 1.8 percent, which signals that companies are not feeling confident enough about economic prospects to spend.
Germany, Europe's largest economy (and potential savior) conducted a bond auction that was horrible. In fact, it was one of the country's weakest efforts since the launch of the euro. If investors are getting so spooked by the deteriorating European Union that they are reluctant to lend money to Germany, then this could get a lot uglier. Then again, if it gets really nasty for Germany, you might think that they would be more willing to solve the crisis once and for all.
After China reported a "slow-down" in growth to 9.1 percent, it's not surprising that Chinese manufacturing is following suit. The preliminary HSBC China Manufacturing Purchasing Managers' Index fell to 48 in November from 51 in October. A reading below 50 indicates a contraction in activity, while anything above that indicates growth.
The only good news on a day like today is that tomorrow we can give thanks that the markets are closed!