Stocks Fall Amid Weak Economic Data
Thursday February 21, 12:46 pm ET
By Joe Bel Bruno, AP Business Writer
Wall Street Mixed After Weak Economic Data Sparks Concern About Recession
NEW YORK (AP) -- Wall Street retreated in an erratic session Thursday as the latest round of economic data intensified investors' fears that the economy is falling into a recession.
Investors were looking for data that would be upbeat enough to stave off a sharp economic slowdown, but not get in the way of further interest rate cuts. They were disappointed when a report from the Philadelphia Federal Reserve showed manufacturing fell more than forecast. Meanwhile, the Conference Board's gauge of leading economic indicators for January, used to predict which direction the economy is headed, posted its fourth straight drop.
Traders are already pricing in another interest rate cut -- perhaps up to half a percentage point -- after minutes from the U.S. Federal Reserve's last policy-setting meeting indicated central bankers will remain vigilant about the economy. Still, the market is concerned that the economy could be weak enough that rate cuts, which take months to work their way through the economy, won't stop further weakening.
The Fed, which meets again March 18, forecast was for slower growth and continued risks to the economy from housing and credit markets.
"What you're seeing is a tug of war out there," said Arthur Hogan, chief market analyst at Jefferies & Co. "There are those that believe we're in a recession and earnings will move lower, and others that feel we're working on a bottom. That can change the direction of stocks minute-by-minute."
In early afternoon trading, the Dow Jones industrial average fell 75.14, or 0.60 percent, to 12,352.12.
The biggest drag on the Dow was General Motors Corp. after lender GMAC LLC, which is part-owned by GM, said it will slash hundreds of jobs at its auto finance business. GM fell 99 cents, or 3.9 percent, to $24.55.
Broader indexes also declined. The Standard & Poor's 500 index shed 7.74, or 0.57 percent, to 1,352.29, while the Nasdaq composite fell 9.23, or 0.40 percent, to 2,317.87.
Bond prices moved sharply higher on expectations of a cut in interest rates. The yield on the 10-year Treasury note, which moves opposite its price, fell to 3.80 percent from 3.89 percent late Wednesday.
Light, sweet crude for April delivery rose 6 cents to $99.64 a barrel on the New York Mercantile Exchange after reaching a new high above $101 overnight.
Gold and platinum also jumped to record highs. The dollar dipped slightly against the euro and yen.
The markets had little reaction to a Labor Department report that showed the number of U.S. workers filing new claims for unemployment benefits fell last week. However, claims lasting more than one week rose, suggesting idled workers are staying unemployed longer.
In corporate news, there was further evidence that the global credit crisis is not near an end. French bank Societe Generale SA said a trading scandal and write-downs linked to the crisis led to a loss in the fourth quarter. The bank lost $4.91 billion, compared with a $1.73 billion profit during the same period of 2006.
MBIA Inc. fell 19 cents to $11.99 after activist shareholder William Ackman's late Wednesday opposed a plan that struggling bond insurers be split into two companies. The company said Ackman, a hedge fund manager, stood to benefit from negative bets on the stock.
Citigroup upgraded Cisco Systems Inc. The biggest U.S. maker of computer-networking equipment was upgraded to "buy" from "hold" because of attractive valuations and hopes that a slowdown this year won't be as steep as first expected. Cisco rose 59 cents, or 2.5 percent, to $23.79.
Also, Blackberry maker Research In Motion Ltd. raised its outlook for fourth-quarter subscriber additions by about 15 percent to 20 percent, citing the popularity of smartphones in the holiday selling season. The stock surged $9.40, or 9.6 percent, to $107.31.
The Russell 2000 index of smaller companies fell 4.25, or 0.60 percent, to 705.77.
Declining issues led advancers by a 3 to 2 basis on the New York Stock Exchange, where volume came to a relatively low 590.6 million.
Overseas, Japan's Nikkei stock average closed up 2.84 percent. Britain's FTSE 100 added 0.65 percent, Germany's DAX index rose 0.07 percent, and France's CAC-40 rose 0.96 percent.
New York Stock Exchange: nyse.com
Nasdaq Stock Market: nasdaq.com
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