NEW YORK, Sept. 4, 2008
Wall Street Takes A Nosedive
Back-To-School Retail Sales Disappointing; Unemployment Claims On The Rise
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(AP / CBS)
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Interactive Eye On The Economy In-depth features on U.S. markets, taxes, employment and the Federal Reserve.
The market was already nervous as it waited for the government to release its August employment report on Friday. So news from the nation's major retailers that shoppers curtailed their spending last month due to higher gas and food prices came as a heavy blow.
Wal-Mart Stores Inc., the world's largest retailer, beat expectations because of its big discounts, but many teen retailers and luxury chains did poorly, a sign that consumers are spending mostly on essentials and putting discretionary buying on hold.
Meanwhile, the Labor Department said new applications for unemployment insurance rose by 15,000 last week from the previous week. That broadly missed expectations for a fourth-straight week of declines, heightening worries that the average American - already feeling the effects of the weak housing market - will have even less means to spend.
Furthermore, if the job market keeps deteriorating, it is tough for Wall Street to see a rebound in sight for the economy's biggest culprit: the tumbling housing market.
"You have to have a paycheck to pay that mortgage," said Craig Peckham, market strategist at Jefferies & Co.
The numbers released Thursday were a sign that despite some upbeat reports over the past month, the economy remains deeply troubled. Investors are not expecting any promising news in the August jobs report, particularly after the ADP National Employment Report said that private sector employment decreased in August by 33,000. Economists are predicting the government to report the eighth straight monthly payrolls drop, and a rise in the unemployment rate.
The market was so disheartened that it showed little reaction when the Institute for Supply Management said the service sector grew unexpectedly in July for the first time in three months as new orders increased and inflation moderated. The August reading of 50.6 was higher than the 50.0 expected, and the reading of 49.2 in July; but the sector's edging above the threshold between contraction and expansion was hardly a sign of a robust economy.
An economic recovery appears to be far off to investors - and with the Dow down more than 15 percent for the year so far, they don't appear to be holding out for a significant upturn in stocks, either.
"We're seeing nothing but sellers," said Ted Oberhaus, director of equity trading at Lord, Abbett & Co. "In a bear market, you sort of really don't need an excuse to sell."
The Dow fell 344.65, or 2.99 percent, to 11,188.23. It was the worst drop for the blue-chip index since June 26, when it fell more than 358 points, or 3.03 percent.
Broader indexes also tumbled. The Standard & Poor's 500 index fell 38.15, or 2.99 percent, to 1,236.83, and the Nasdaq composite index dropped 74.69, or 3.20 percent, to 2,259.04.
All three indexes moved back into bear market territory, defined as a 20 percent drop from a recent peak. The indexes were at highs, including a record 14,198.09 for the Dow.
As investors fled stocks, they turned to the safety of government bonds, sending Treasury prices higher. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.63 percent from 3.70 percent late Wednesday.
Not even another drop in oil could console investors. After the government reported a lower-than-expected drop in U.S. gasoline and crude supplies, light sweet crude fell $1.46 to settle at $107.89 a barrel on the New York Mercantile Exchange. Crude is about $30 below its July 11 high of $147.27. Gold prices also slid Thursday.
Toll Brothers Inc. CEO Robert Toll said he is seeing signs the housing market is stabilizing, but Ara Hovnanian - CEO of Hovnanian Enterprises Inc. - said he sees no evidence yet of a market bottom. The stock market appeared to agree with the latter sentiment on Thursday, sending homebuilder stocks sharply lower.
Toll Brothers performed better than its peers, even after posting a third-quarter loss; its shares rose 27 cents to $25.07.
But shares of Hovnanian, which on Wednesday reported a quarterly loss, sank $1.35, or 17.4 percent, to $6.40. Pulte Homes Inc. fell 86 cents, or 5.8 percent, to $12.05, and KB Home fell $1.22, or 5.7 percent, to $20.11.
The financial sector performed poorly on Thursday as well, particular after bond fund manager Bill Gross wrote in a commentary on his firm's Web site that the U.S. Treasury needs to provide funding to mortgage financiers Fannie Mae and Freddie Mac.
Freddie shares fell 30 cents, or 5.6 percent, to $5.08, and Fannie shares fell 65 cents, or 8.9 percent, to $6.67.
The biggest decliners among the 30 Dow components were three financial stocks: Bank of America Corp., which fell $2.36, or 7.2 percent, to $30.60; Citigroup Inc., which fell $1.31, or 6.7 percent, to $28.30; and American International Group Inc., which fell $1.36, or 6 percent, to $21.22.
Wal-Mart's stock ended down only a penny at $59.78, after it said sales of groceries and back-to-school products helped its August same-store sales rise 3 percent, above expectations.
But the discount chain's success was seen as the corollary of a cash-strapped consumer, and other retailers fell. JCPenney Co. fell $2.07, or 5 percent, to $39.57, while Gap Inc. fell 83 cents, or 4.2 percent, to $19.14.
Wall Street found no solace in tumbling oil prices - if anything, the drop in commodities weakened the market further by sending the stocks of energy and mining companies lower.
The Russell 2000 index of smaller companies fell 23.29, or 3.14 percent, to 718.62.
Declining issues outpaced advancers by about 5 to 1 on the New York Stock Exchange, where volume came to 1.30 billion shares.
© MMVIII The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.
Best-selling author Mitch Albom on his first nonfiction work since "Tuesdays with Morrie."
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See all 55 Commentsthe PPT (plunge protection team) can''t keep pumping up this phony Bush/Reagon/McCain economy every single day.
Ever since those "tax cuts for the rich" were passed by Republicans, the inflation just skyrocketed, and instead of wages going up and real jobs created, we relied on "home equity line of credit" and "credit cards".
Now that that has happened, our economy is going to face a tsunami come Sept 30th when the bail out starts for Fannie and Freddie; the first installment is 243 billion, or 2 more Iraq war fundings.
The hyper inflation that we already experienced so far will pale in comparison to the Zimbabwe like inflation to come, plunging us into a New Dark Age.
Meanwhile John McCain and the Republicans found a high school cheerleader to rally around because she can tell a few good one-liners and crack a few jokes.
Folks, I''m not exaggerating when I say we cannot afford more of McSame, our fiat-currency needs "taxes" to back the "dollar" up or go back to the gold standard.
If the Federal Reserve attempts to print it''s way out of Fannie and Freddie without collecting huge, huge amounts of "taxes" then we are doomed by unbelievable hyper-inflation!!!
Not to worry - folks.
All it takes is one day - the Wall Street comes back up (green) a little bit,
Ms. Elaine L. Chao - Secretary of Labor under GWB since January 29, 2001 - will burst out of her office and make the similar statement that she
always will - "See the Economy is growing, the job market is improving".
Elaine L. Chao - what an IDIOT!
Oh - almost forgot about her two idiot bosses - i.e. GWB and D-i-c-k Cheney - a.k.a. Dumb and Dumber!
8 years of Dumb and Dumber is ENOUGH!
Oh, if somebody buys a lot of stock in the company they work for and they happen to be a board member or someone similarly high ranking, does that mean it''''s time to sell before that person does?
Posted by hypnotoad72 at 06:53 PM : Sep 04, 2008
No JOBS leave because of OUR policy and VERY badly negotiated Trade Agreements. We have seen our standard of living drop through the floor since George Bush and his Trickle Down took a Balanced Budget and a Surplus and turned that into Record Debt. IF we do NOT change that Failed Policy we can most certainly expect MUCH worse.
Doom and Gloom.
That''''s what they want, at ALL COST!
Posted by republic1776 at 05:59 PM : Sep 04, 2008
Are you saying that the "media" caused the stock market to drop like a stone? Are you saying that the BAD economic news had nothing to do with it?? Man thats the dumbest statement I''ve ever heard in my life. The Economy is in the DUMPS sparky, it''s NOT in our minds and we are in VERY bad trouble.
Oh, if somebody buys a lot of stock in the company they work for and they happen to be a board member or someone similarly high ranking, does that mean it''s time to sell before that person does?
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Posted by jamesm12341
What has likely had an impact is that Wall Street, who wants John McCain to win (there will be less opportunity to steal pennies from peasants under an Obama presidency), has assessed that adding Palin to the ticket reduced McCain''s chance of winning.
Hence the stock market drop.
A blunder by McCain--an example of McCain''s "shoot from the hip" style and failure to consider his options in a mature way.
McCain is a Punk, who never really grew up.
If he was mature enough to be President, he''d have picked Romney, or maybe Pawlenty, as Veep.
But he picked a backwoods Holy Roller with a big mouth instead.
Wall Street knows a loser when they see her.
NOSEDIVE, SHNOSEDIVE!!!
Nothing but a nation of whiners. It''s all in your mind... Quit your moanin. More to come tonight. Don''t touch that dial!
Doom and Gloom.
That''s what they want, at ALL COST!
Posted by republic1776 at 05:59 PM : Sep 04, 2008
Huh...did you read the story?
You are trying to tell the world that "the Liberal Left Media Machine" took away all of those people''s jobs?
You are trying to tell the world that "the Liberal Left Media Machine" raised gas and food prices?
That is just crazy.
What are you - a Republican?
Doom and Gloom.
That''s what they want, at ALL COST!
According to the neocon Fascist Nazi Republicans, things are great, there are jobs everywhere, the "middle class" is alive and well and making LOTS of money (SPENDING LOTS OF IT, TOO!), and we have never had it so good. According to Karl Rove, the Great Emperor Bush II will go down in history as the greatest Emperor EVER, even greater than Lincoln, Teddy and Franklin D. Roosevelt (but only slightly above Reagan!).
So what is wrong with Wall Street? The only explanation per the neocons is that the traders must be suffering another "hangover" again, those cowardly drunkards!!!!
SIG HEIL, BUSH!!!!
sig heil, STOP YOUR WHINING, McCain!!!!
sig heil, HOCKEY MAMA, Palin!!!!
"I don%u2019t understand how the economy works, I%u2019ve got to get a V.P. that will show me how it works."
Palin, McCain''s V.P. choice, simply doesn''t fill the hole in McCain''s admitted economic "bucket".
Wendy Gramm caused Enron!
Don''t believe it?
Google it.
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