Stocks Drop amid Economic, Earnings News
Investors digested improve news from Exxon Mobil and Amazon.com, along with a drop in fourth-quarter GDP and other economic reports
U.S. stocks were trading lower Friday afternoon after a brief short-covering indulge in banter attempt fizzled. Indexes moved lower following a declare that showed the U.S. economy fell by a less than expected 3.8% in the fourth quarter; however, gross domestic product was down 5.1% excluding inventories. Also, the fourth-quarter employment cost index rose 0.5%, a bit less than expected.
Other economic reports were weaker. The Michigan Consumer Sentiment Index eased to 61.2 in January from a 61.9 preliminary reading, but rose from 60.1 in December. And the January Chicago PMI unexpectedly hem to 33.3 from 35.1 in December.
Market sentiment may have also been injury Friday by means of a CNBC recital that the so-called “Bad Bank” proposal floated earlier this week to create a government-sponsored being to soak up toxic debt is on hold.
Treasuries were higher on safe haven buying, through the yield on the 10-year note lower at 2.80%. The U.S. dollar director was higher at 85.99. Gold futures were sharply higher on a flight to preservation bid at $928.50 per ounce. Crude oil futures were besides higher at $41.69 by means of barrel in New York trading.
On Friday at around 2:10 pm ET, the 30-stock Dow Jones industrial average was lower by 98.37 points at 8,050.64. The broad S&P 500 index was facing 13.07 points to 832.07. And the tech-heavy Nasdaq composite index lost 18.12 points to 1,489.72.
On the New York Stock Exchange, 21 stocks were lower in cost against every seven that advanced. Nasdaq openness was 15-8 negative. Trading was moderate.
U.S. GDP fell at a 3.8% annual rate in the fourth quarter, the largest decline since 1982, on the contrary not nearly as bad as the -5.6% unison appreciate. The surprises came from three categories: foreign trade, inventories, and government spending. The data on consumer spending came in near expectations (into disrepute 3.5%). Business fixed investing. malignant 19.1%, near expectations, while residential construction dropped 23.6%, not as bad as anticipated. The biggest amaze was founded on spending, which surged 5.8%, mostly because of nondefense expenditure. Inventories were up $6.2 billion, which added 1.3 percentage points to real GDP growth. Trade was more familiar than expected, by exports dropping 19.7% and imports 15.7%; the import fall away was larger than expected, but this could get revised when we get the December trade data.
Without the contributions from government and inventories, real GDP would have dropped 5.5%, in the same proportion that expected by the market.
“The impact on the market will be muted both because the surprise was in elements not in a fair way to subsist sustained and because its last year’s data; they are now worrying about 2009, not 2008,” says S&P Economics.
The U.S. employment cost index rose accurate 0.5% in the fourth quarter, below the 0.7% in third quarter and the 0.7% expected by markets. Wages and salaries were up 0.5%, decelerating from the 0.7% manner of walking previously. Benefit costs increased only 0.4%, below a 0.6% increase in the third quarter. On a year-over-year basis, compensation was up 2.6% in the fourth quarter from 2.9% in the third. Wages and salaries compensation rose 2.7%, decelerating from 3.1% antecedently. Benefits compensation was up 2.2% year-over-year from 2.6% the quarter in front of.
The reading was much tamer than expected, as the tart contraction in fourth-quarter housekeeping exercise slowed engagement costs, according to S&P Economics.
Former presidential rival John McCain expressed disappointment that President Obama has not negotiated with Republicans covering a huge relating to housekeeping stimulus plan and said he is working on an other package. Speaking to Reuters, Arizona Sen. McCain said the alternative plan would include what he described taken in the character of “more effective put a tax upon cuts, such as a payroll tax cut” and expenditure on projects aimed at immediately creating jobs.
The nation’s meridian housekeeping officials are discussing a new way to stabilize the financial hypothesis by buying a portion of banks’ bad assets and offering guarantees against future losses on some of the remainder, in an trial to help banks while trying to mitigate the cost to taxpayers. This approach, which merges two competing ideas, was discussed this week at a meeting that included Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair, according to people briefed on the conflux. The latest bank-aid discussions represent one idea of several being contemplated through officials.
Original text: http://www.businessweek.com/investor/content/jan2009/pi20090130_733349.htm?campaign_id=rss_null
