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Some Hints of Optimism in Economic Data

September 1, 2011 by Leave a Comment

In addition, a private manufacturing index rose more than expected.

But construction spending fell a sharp 1.3 percent in July, with big declines in government projects, and productivity narrowed in the second quarter, making Thursday another day of mixed signals on the state of the United States economy.

The Labor Department said on that weekly applications fell 12,000 to a seasonally adjusted 409,000 last week, the first decline in three weeks.

A strike by Verizon workers drove applications higher during the previous two weeks. The strike ended last week and is no longer affecting applications.

Applications have fallen from an eight-month high of 478,000 in April. Still, they typically need to drop below 375,000 to signal sustainable job growth, analysts say. They haven’t been at that level since February.

Meanwhile, the Institute for Supply Management’s index indicated that manufacturing expanded again in last month, its 25th consecutive monthly increase. Analysts surveyed by FactSet had expected a contraction.

Although the index fell to 50.6 last month from 50.9 in July, a level above 50 signals that the economy is expanding.

In a separate report, the Labor Department said worker productivity fell this spring in the United States at a faster pace than previously estimated, while labor costs were rising at a faster clip. Both developments could pose threats to a fragile economic recovery.

Productivity declined at an annual rate of 0.7 percent in the April-June period, a bigger drop than the 0.3 percent decline reported a month ago. Labor costs rose at an annual rate of 3.3 percent, faster than the 2.4 percent increase originally reported.

The changes reflected downward revisions made last week to overall economic growth that showed the economy’s output barely growing in the spring. Declining productivity, if it persists for a prolonged period, would represent a serious economic threat, while rising labor costs would cut into corporate profits.

Article source: http://www.nytimes.com/2011/09/02/business/economy/us-jobless-claims-dip-after-verizon-strike-ends.html?partner=rss&emc=rss

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Indexes End the Day Up, but Down for the Month

September 1, 2011 by Leave a Comment

Capping a period characterized by wild swings of hundreds of points, all three major indexes finished the month lower, despite rising for the day.

On Wednesday, shares shifted between gains and declines, running from flat to more than 1 percent, in a market weighed down by news that the Justice Department would seek to block ATT’s proposed acquisition of T-Mobile USA.

Shares shot up after the opening, but the ATT news dragged down the telecommunications sector. Then the three main indexes lost steam after a Federal Reserve official said that policy adjustments were not justified now.

In the last half hour, a bounce sent the Dow Jones industrial average above its starting point for 2011, but there was still not enough momentum to finish the month higher.

The Dow was up 53.58 points, or 0.46 percent, to 11,613.53 at the close, just above its 2011 start of 11,577.51. It was down more than 4 percent for the month. The Standard Poor’s 500-stock index was up 5.97 points, or 0.49 percent, to 1,218.89, but down more than 5 percent for the month.

The Nasdaq composite index rose 3.35 points, or 0.13 percent, to 2,579.46. It closed down more than 6 percent for August.

ATT was the second-most actively traded stock in the telecommunications sector, behind Sprint. It fell 3.85 percent, to $28.48. Its rival Sprint Nextel was up nearly 6 percent to $3.76.

August was punctuated by volatility in the broader markets, as choppy economic data renewed discussions about whether the economy was headed for another recession. Concerns about euro zone debt, fiscal uncertainty in the United States and the potential for further economic stimulus from the Federal Reserve also affected market sentiment.

Those issues persisted this week when the Fed released minutes from its Aug. 9 meeting, where its policy makers considered changing the size or composition of the Fed’s balance sheet or reducing the interest rate paid on banks’ excess reserve balances.

Fed policy makers have agreed to consider other options at their next meeting in September. Some analysts said the Fed might need more information before deciding on further stimulus.

On Wednesday, Dennis P. Lockhart, the president of the Federal Reserve Bank of Atlanta, appeared to tamp down the prospect.

“We may find, as economic circumstances evolve, that policy adjustments are required,” Mr. Lockhart said in speech to the Chamber of Commerce in Lafayette, La. “In more adverse scenarios, further policy accommodation might be called for. But as of today, I am comfortable with the current stance of policy, especially considering the tensions policy must navigate between the short and long term and between recovery and the need for longer-term structural adjustments.”

The Treasury’s benchmark 10-year note fell 17/32 to 99 1/32, pushing the yield to 2.23 percent, up from 2.18 percent late Tuesday.

Mark T. Lamkin, the chief executive officer of Lamkin Wealth Management, said the late-day swoon in shares could be attributed to short-term technical profit-taking, before the release of the national jobs report for August on Friday. It could also be a reaction to Mr. Lockhart’s remarks, he said.

Britain’s FTSE 100 gained 2.4 percent, and Germany’s DAX gained 2.5 percent. In Paris, the CAC 40 rose 3.1 percent. Asian markets were broadly higher on Wednesday.

On Wednesday, new data on factory orders and jobs set up a rise in shares that carried over from markets in Asia and Europe.

The Commerce Department showed that factory orders for July rose 2.4 percent, the largest increase since March. Demand for automobiles and commercial airplanes propelled the orders.

A report on employment from ADP Employer Services showed new jobs on private payrolls totaled 91,000 for August, below forecasts.

Those reports were made public before the release Friday of one of the most closely watched indicators, the Labor Department’s national report on the job situation. Analysts were forecasting a gain of 70,000 in new nonfarm payroll jobs for August, compared with 117,000 the previous month, while the unemployment rate of 9.1 percent was not expected to change, according to a survey by Bloomberg News.

“We are still not seeing job losses, which is what you would see in a recession,” said Anthony G. Valeri, a senior vice president and market strategist for LPL Financial.

Goldman Sachs economists said that the ADP report, which is used to help estimate the outcome of the national report, could mean lower forecasts for Friday’s numbers.

Article source: http://feeds.nytimes.com/click.phdo?i=ed77311c76998c66dd157a38b2cfbb21

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Stocks & Bonds: Once Again, Fear Sends Stocks Down

August 20, 2011 by Leave a Comment

On Monday, stock indexes had finally recovered from the huge sell-off of the previous week, after the downgrade of United States long-term debt by Standard Poor’s late on Aug. 5 unleashed days of painful market turmoil.

But by midweek, stocks were falling again, as investors worried about Europe’s debt crisis, and the possibility of recession in the United States intensified. The Standard Poor’s 500-stock index slid 1.5 percent on Friday, and closed down more than 4 percent for the week.

It was the fourth consecutive week of market declines as investors remained rattled. The latest signs of strain came from some European banks laden with debt from the region’s troubled economies — strains that could spread across the Atlantic.

Despite a meeting in Paris earlier in the week between the leaders of Germany and France to pledge greater economic coordination between nations sharing the euro, confidence quickly eroded in the markets over whether Europe’s policy makers have solutions to the Continent’s debt crisis.

In the United States, dismal economic data on Thursday pointed to an unexpectedly abrupt slowdown in manufacturing and a pickup in inflation.

Next week, the market’s attention will turn to the Federal Reserve’s annual symposium in Jackson Hole, Wyo., for signs of how confident the chairman of the Fed, Ben S. Bernanke, is about the strength of the American recovery.

At last year’s symposium, faced by a similar midyear slowdown, Mr. Bernanke paved the way for a second round of large-scale bond purchases, or quantitative easing.

But after the Fed this month already promised to keep short-term interest rates close to zero for the next two years, few economists expect further stimulus from the Fed.

On Friday, markets closed sharply lower in Asia and Europe, and that sentiment then carried over into the United States. Stocks had been briefly higher in the morning hours, but then slipped. Some analysts attributed the slide to technical factors and thin volume.

At the close, the S. P. 500 was down 17.12 points, or 1.5 percent, at 1,123.53. The Dow Jones industrial average fell 172.93 points, or 1.57 percent, to 10,817.65. The Nasdaq composite index lost 38.59 points, or 1.62 percent, to 2,341.84.

For the week, the S. P. was down 4.6 percent, the Dow fell 4 percent and the Nasdaq slid 6.6 percent. The steepest declines were on Thursday, when the indexes slipped more than 3 percent on persistent worries about the economy and Europe’s debt problems.

Stocks of companies most susceptible to slow growth and those related to banks have been hit. Technology, financials and industrials were among the sectors down more than 1 percent on Friday.

“You are still seeing a lot of the economically sensitive names leading us on the way down,” said Seth Setrakian, co-head of United States equities at First New York.

Some of the downturn on Wall Street was attributed to technical reasons. Friday, for example, was a day when options contracts expire, an event that can fuel volatility or market moves.

Analysts were also quick to point out that on a day before a summer weekend, low volumes could unfold into a “bleed” toward the end of the trading session — and indeed, what had been a relatively placid session in New York turned downward in the final hours.

“Just as importantly, any important policy makers that can come up with anything constructive are on vacation,” said Mr. Setrakian. “So what good news can come over the weekend?”

“So everyone is playing much lighter and much tighter,” he said. “It is very simply the data that has been coming out economically has not been constructive.”

Gold continued the sharp ascent it has seen over the last months, demonstrating that nervousness remained intense. Gold futures were up $30, to $1,848.90 an ounce.

Europe’s major stock indexes ended the day lower. The FTSE 100 in London fell 1 percent and the Euro Stoxx 50, a  barometer of European blue-chip stocks, pulled back 2.15 percent.

Asian markets were also lower. The Nikkei 225 index in Japan lost 2.51 percent, and the major market indexes in Singapore and Hong Kong closed down more than 3 percent.

Tension on money markets, which some analysts said was overblown, awoke unpleasant memories of the seizure in interbank lending that came after the collapse of Lehman Brothers in 2008.

“Everybody is taking risk off the table,” said George Rusnak, national director of fixed income for Wells Fargo. “This is probably going to be a trend over the next several weeks. There is not a lot of robust trading going on right now.”

Mr. Rusnak and other analysts again noted that concerns had mounted about the banking sector, especially with respect to the exposure of American banks to their European counterparts.

One drag on the American markets, and specifically the tech sector, on Friday was Hewlett-Packard, which is considering plans to spin off the company’s personal computer business into a separate company and is spending $10 billion on Autonomy, a business software maker. Shares of Hewlett-Packard fell 20 percent, or $5.91, to $23.60.

The benchmark 10-year Treasury note was unchanged, and the yield remained at 2.07 percent. It had touched record lows below 2 percent in intraday trading on Thursday.

“The growth outlook being hurt in Europe, and the ongoing sluggish data we have seen in the United States is the underlying issue the stock market is trying to grapple with,” said Robert S. Tipp, a managing director and chief investment strategist for Prudential Fixed Income.

He said the crisis of confidence was evident as investors parked money in cash and short-term fixed-income assets.

One thing to worry about next week will be whether the European Central Bank can continue to hold down yields on Italian and Spanish bonds. If not, Italian and Spanish borrowing costs might reach the point where they became too expensive, raising the risk of default.

On Friday, Italian bonds and Spanish bonds dipped to 4.96 percent.

Jack Ewing and Julia Werdigier contributed reporting.

Article source: http://www.nytimes.com/2011/08/20/business/daily-stock-market-activity.html?partner=rss&emc=rss

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U.S. Stocks Reverse Again, Up 4%, on Economic Data

August 12, 2011 by Leave a Comment

In a display of volatility, the American stock market this week has produced alternating days of collapsing prices — accompanied by speculation of a renewed financial crisis that could be even worse than the one that began in 2008 — and sharply rising prices amid reassurances that banks are healthy and corporate profits strong.

On Thursday, the Standard Poor’s 500-stock index soared 51.88 points, or 4.6 percent to 1,172.64. Traders pointed to a small decline in claims for unemployment insurance in the United States and to reassurances from French officials that their country’s banks were safe.

That gain recovered all of a 4.4 percent decline on Wednesday. For the two days, the index was up 0.11 points, or one one-hundredth of 1 percent. On Monday, the market had fallen by 6.7 percent, only to leap by 4.7 percent on Tuesday. So far this week, the index is down by 2.2 percent.

“It is a very, very tense, emotional and momentum-driven market right now,” said Eric Thorne, an investment adviser at Bryn Mawr Trust, a Pennsylvania bank. The apparent motto, he added, is “shoot first, ask questions later.”

Never before in the history of the S. P. index, which goes back to 1928, had there been alternating gains and losses of more than 4 percent on four days. In most years, there were no such days at all.

There were only two previous times since the Great Depression when the S. P. 500 moved at least 4 percent in four consecutive trading sessions. The first came in October 1987, when the market crashed, and the second occurred in November 2008, as the financial crisis intensified. But neither of those saw alternating gains and losses. In each of those cases, the pattern was two declines, then two gains.

This year, market worries began to intensify in late July, as European leaders reached yet another agreement to provide emergency funding for Greece, which cannot borrow in the markets, and as a Congressional impasse threatened to prevent an increase in the American debt ceiling, which could have led to default. At the same time, sharp revisions in recent economic data raised concerns that the United States economy might be entering a new recession.

The worries accelerated last week, as borrowing costs shot up for two large European economies, Spain and Italy, and Friday night Standard Poor’s credit ratings arm lowered the rating of United States Treasury bonds to AA+, from AAA.

The European Central Bank tried to calm markets by beginning to buy Italian and Spanish bonds on Monday, but then traders appeared to grow nervous about French government bonds. Those worries soon spread to French banks, which hold many such bonds, and their prices fell sharply on Wednesday.

That panic appeared to peak early Thursday morning, New York time, when a Reuters report, which did not identify its sources, said at least one bank in Asia had cut its credit lines to the major French banks and that others were reviewing their lines because of perceived risks. The French stock market, which had been about level for the day, fell more than 3 percent within an hour, and American stock index futures fell sharply.

But there was no confirmation of the report, and it was denied by both bankers and officials in Paris. Prices quickly recovered.

Frédéric Oudéa, the chief executive of Société Générale, whose shares have suffered the most in recent days, told Le Figaro, the French newspaper, in an interview published Thursday that the bank had “suffered a series of attacks in the market,” on the basis of rumors about its financial condition that he denied “most vigorously.”

An announcement that the leaders of Germany and France would meet might have helped stocks strengthen, said Paul G. Christopher, chief international investment strategist for Wells Fargo Advisors. “The markets need to have reassurance from governments that they are going to take care of their budget deficits and going to backstop their banks,” he said.

The stock market collapse during the financial crisis in 2008 and 2009 is still fresh in the minds of many investors, but so too is the sharp rebound in share prices that began in the spring of 2009, when the credit crisis was at its height. Those competing memories appear to have contributed to the wild swings, with investors alternately fearful of a collapse and worried that they might get out at the bottom.

While the American economy has been stumbling since the last recession officially ended in June 2009, corporate profits have risen to record levels. Cisco, the large American technology company, reported surprisingly strong earnings on Wednesday, and its share price leaped 16 percent. But that gain still left the price a little lower than it was two weeks ago.

Eric Dash contributed reporting.

Article source: http://www.nytimes.com/2011/08/12/business/daily-stock-market-activity.html?partner=rss&emc=rss

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What Would It Take to End Stalemate

July 30, 2011 by Leave a Comment

“Congress is often referred to as a reactive force rather than a proactive one,” said Tobias Levkovich, chief United States equity strategist at Citigroup. “If we had a 500-point drop in the Dow, it would scare that reactive body.”

With House and Senate debt limit proposals set to collide on Capitol Hill, Wall Street was anxiously awaiting the opening of Asian markets on Sunday night in the absence of a compromise by lawmakers.

Investors expressed their displeasure Friday with both the political stalemate and new economic data that showed the economy grew at a slower-than-expected pace in the second quarter.

The Dow Jones industrial average, which has retreated for six consecutive trading days, was down 96.87 points, or 0.79 percent, to 12,143.24. The Standard Poor’s 500-stock index, a broader measure of the market, lost 8.39 points, or 0.65 percent, to 1,292.28. The Nasdaq composite index fell 9.87 points, or 0.36 percent, to 2,756.38.

The S. P. was down 3.9 percent this week, the biggest weekly drop in more than a year. The last time the broader market closed lower for three consecutive months was in 2008, for the months of September, October and November. That was also the last time Washington surprised investors and failed to act.

On Sept. 29, 2008, lawmakers rejected the TARP legislation to bail out the banking system at the height of the financial crisis after the collapse of Lehman Brothers and investors sent the Dow plunging by 778 points.

Congress quickly reversed course, and by Oct. 3, both the Senate and the House had approved the legislation. But the damage had been done — that 778-point drop wiped out $1 trillion in shareholder value. And with investors unnerved, the stage had been set for more big drops. The Dow fell 936 points on Oct. 13 and another 889 points on Oct. 28.

“In sum, Washington grumbles, Wall Street stumbles,” said Sam Stovall, chief investment strategist for Standard Poor’s equity research in New York. “Once again, history repeats itself.”

So far, Wall Street isn’t yet in panic mode over the wrangling in Congress over government spending and whether to lift the nation’s borrowing limit of $14.3 trillion by a Tuesday deadline. Without the ability to sell more debt through United States Treasuries, administration officials have said the government will not be able to pay all of its obligations and risks a downgrade in its credit or even a default.

Mr. Levkovich said Friday that most investors were still counting on a resolution to the logjam, averting a default. But, he said, “the level of complacency is eroding. I suspect there will be a lot of frantic calls going around this weekend.”

Though the bond markets have shown considerable nonchalance during the stalemate, signs of distress emerged this week. The yield on the benchmark 10-year Treasury bond fell to 2.79 percent, its lowest level since November. Federal officials held an unusual meeting with senior traders at 20 major Wall Street firms to discuss the government’s contingency plans to keep refinancing its debt.

Federal officials signaled a possible delay next week in the government debt auctions when they solicited feedback from the Wall Street firms that bid for allotments of Treasury securities. At Friday’s meeting at the Federal Reserve Bank of New York, senior Treasury Department officials laid out three proposals that would allow the government to keep refinancing its existing obligations while keeping it under the $14.3 trillion cap, according to two dealers who were briefed on the meeting. The Treasury has about $90 billion of debt that comes due on Aug. 4, and another $410 billion or so in the next few weeks.

One plan calls for a delay in some debt sales until lawmakers reach an agreement on the debt ceiling. Another would reduce the size of the sales. The third option would be to shorten the timetable in which they refinance the debt by selling very short-term bills. The government took similar action in 1995 when Congress briefly ran close to the debt ceiling deadline. But it is the equivalent of living paycheck-to-paycheck.

Azam Ahmed, Eric Dash and Patrick Scott contributed reporting.

Article source: http://www.nytimes.com/2011/07/30/business/wall-street-holds-its-breath-during-debt-talks.html?partner=rss&emc=rss

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Wall Street Holds Its Breath During Debt Talks

July 29, 2011 by Leave a Comment

“Congress is often referred to as a reactive force rather than a proactive one,” said Tobias Levkovich, chief United States equity strategist at Citigroup. “If we had a 500-point drop in the Dow, it would scare that reactive body.”

With negotiations to cut the deficit and raise the debt ceiling deadlocked on Capitol Hill, the Dow Jones industrial average sank nearly 100 points Friday, closing at 12,143.31. Investors expressed their displeasure with both the political stalemate and new economic data that showed the economy grew at a slower-than-expected pace in the second quarter.

The Standard Poor’s 500-stock index was down 3.9 percent this week, the biggest weekly drop in more than a year.

The last time Washington surprised investors and failed to act was on Sept. 29, 2008. Then, lawmakers rejected the TARP legislation to bail out the banking system at the height of the financial crisis after the collapse of Lehman Brothers, and investors sent the Dow plunging by 778 points.

Congress quickly reversed course, and by Oct. 3, both the Senate and the House had approved the legislation. But the damage had been done — that 778-point drop wiped out $1 trillion in shareholder value. And with investors unnerved, the stage had been set for more big drops. The Dow fell 936 points on Oct. 13 and another 889 points on Oct. 28.

“In sum, Washington grumbles, Wall Street stumbles,” said Sam Stovall, chief investment strategist for Standard Poor’s equity research in New York. “Once again, history repeats itself.”

So far, Wall Street isn’t yet in panic mode, Mr. Levkovich said Friday, with most investors still counting on a resolution to the logjam, averting a default. But, he said, “the level of complacency is eroding. I suspect there will be a lot of frantic calls going around this weekend.”

Indeed, within Wall Street’s biggest firms, worries are growing about what inaction will mean for the market.

Many in the business community are concerned that Congress won’t be able to act before the Tuesday deadline, said Robert Nichols, chief executive of the Financial Services Forum, a lobbying group in Washington that represents many of the biggest commercial and investment banks. “We have strongly urged policy makers to reach an agreement this week so we don’t have to learn the grave consequences of inaction.”

David Joy, chief market strategist for Ameriprise, said on Thursday that he still thought a deal would get done by Tuesday. “If we don’t, I would expect there to be an immediate adverse reaction in capital markets, similar perhaps to what happened in TARP.”

The steeper the move, he said, the stronger the message, suggesting that a 5 percent drop — about 600 points on the Dow — would be a wake-up call for Washington.

Investors were also rattled Friday morning by new figures from the Commerce Department that showed an economy on the verge of a stall. The country’s gross domestic product grew just 1.3 percent in the second quarter, while government statisticians revised downward their estimate for first-quarter growth to 0.4 percent, from an earlier estimate of 1.9 percent.

Arvind Sanger, managing partner at the hedge fund GeoSphere Capital Management, said he had reduced his exposure to stocks in the last two days, fearing the market could plunge if the debt issue remained unresolved.

“That’s something that I haven’t seen yet, but I have 2008 fresh enough in my mind that I’m taking it down anyways,” he said.

Despite the standoff in Washington and worries about how a default or a credit rating downgrade might affect the markets, Treasury bonds rallied. The yield on the benchmark 10-year bond was lower by 13 basis points, at 2.82 percent just after 3 p.m.

“Why in the midst of all this would the 10-year yield be that low?” asked Quincy Krosby, a market strategist for Prudential Financial, adding: “Growth is slow, and it moved down even more in the midst of this Washington politicking.”

The view in the market, she said, is that the debt situation “is going to add to growth concerns if this doesn’t get fixed in a timely, orderly fashion.”

Azam Ahmed and Patrick Scott contributed reporting.

Article source: http://www.nytimes.com/2011/07/30/business/wall-street-holds-its-breath-during-debt-talks.html?partner=rss&emc=rss

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Bucks: Feeling Anxious? You’re Not Alone

June 24, 2011 by Leave a Comment

4:48 p.m. | Updated

The economic recovery may be stalling, housing prices still haven’t bottomed out, and the world is beset by revolutions and natural disasters, from tsunamis to tornadoes.

Feeling a bit anxious?

You’re not alone.

The Index of Consumer Sentiment, produced monthly by the University of Michigan, actually rose a bit in May, to 74.3, from 69.8 in April, but dipped again in the preliminary report for June, to 71.8. Writing in a note accompanying the April index, Richard Curtin, chief economist for the university’s surveys of consumers, said consumers seemed to have a negative outlook on their earning potential. “Consumers now give just one chance in three that their income will outpace the inflation rate,” he wrote. It’s not that people expect inflation to increase, he said. Rather, they don’t expect higher incomes in the years ahead.

Depressed yet? Then consider this. Dan Geller, who operates Moneyanxiety.com and markets its research to retail and banking businesses, said his “money anxiety index” was the highest it had been in 30 years. Mr. Geller said he used “structural equation modeling” to crunch various monthly economic data, like inflation and unemployment rates and levels of spending and saving, to create a number that approximates worry about money. He has created index numbers that go as far back as 1959, and he said that people were pretty concerned right now.

“Basically the core reason for the financial anxiety is that consumers don’t have any confidence, or they have low confidence, in any prospect of economic recovery,” Mr. Geller said.

The Money Anxiety Index for March was 88.9; April, 91.3; and May, 91.9. That’s still well below the index’s high of 136 during the recession of the early 1980s, but the trend is worrisome. Historically, he said, when the index rises for five or more months in a row, a recession is likely.

How are you feeling about your financial future? Let us know.

Article source: http://feeds.nytimes.com/click.phdo?i=feeab5969cd75704bfe44fcb5484265f

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Stocks & Bonds: Markets Falter as Worry Rises in Greek Crisis

June 16, 2011 by Leave a Comment

Thousands took to the streets in Athens to protest austerity measures, and Prime Minister George Papandreou said he would reshuffle his cabinet and request a vote of confidence in Parliament. At stake is the prospect of a new bailout plan for the debt-ridden country.

Anxious investors feared the situation could spin out of control, igniting a series of crises in other heavily indebted euro zone countries, like Portugal, Ireland and Spain. That, in turn, could threaten Europe’s banks and even reach into the United States financial system.

“We are pretty much giving back everything we got yesterday and more,” said Lawrence R. Creatura, a portfolio manager at Federated Investors, noting the rise in the main American indexes of more than 1 percent Tuesday. “Today the market just can’t escape the undertow of deteriorating economic data and political events.”

After having lost more than 200 points earlier Wednesday, the Dow Jones industrial average closed down 178.84 points, or 1.5 percent, to 11,897.27. The markets rallied earlier this year on confidence about the economic recovery, and at one point the Dow was poised to break through the 13,000 mark. But stocks have been falling week after week on a drumbeat of dismal economic news from soft job creation to falling housing prices.

The market has surrendered almost all of its gains for this year, falling 7 percent since its peak at the end of April. It may be nearing what is known as a market correction, a sort of miniature bear market characterized by a 10 percent decline in a short period of time.

Greece needs to pass a new round of austerity measures by the end of the month in return for new loans from the International Monetary Fund and the European Union.

In Athens, thousands joined a nationwide strike as Parliament prepared to debate a second round of sharp cuts in government spending. The measures are unpopular with Greeks, who have already suffered deep salary and pension cuts.

Although many analysts expect that a default by Greece on its debts will eventually be averted, the political uncertainty in Greece is providing an unsettling backdrop for investors. In addition, they are fretting because the United States this summer faces its own fractious negotiations over raising the federal debt ceiling.

The European Central Bank said on Wednesday in a report on financial risk that it would be a big mistake for Greece to be allowed to miss its debt payments, either by delaying payments to a later date, or by paying back less than the full amount. Germany, the biggest economy in the 17-member euro zone, is proposing that private sector bondholders accept some form of a loss on their Greek bonds.

This could prove damaging to Greek banks, requiring them to mark down the value of their holdings of government debt at a time when they are struggling with bad loans in their home market. And it could have similar dire repercussions for other European banks that hold Greek debt.

“The concern is that a default by Greece would not only hurt European banks but could also spread to U.S. banks,” said Bernard Baumohl, an economist at the Economic Outlook Group in Princeton, N.J. “Should there be a default, it can only have a delaying effect on the recovery, hurting American exports and the banks’ ability to lend.”

Pointing to a slowing United States economy, a Federal Reserve regional report for New York State showed a decline in both manufacturing activity and optimism for June. Also Wednesday, a government report showed consumer prices crept up again, though they were held in check by a decline in energy prices.

The recent economic data has prompted economists to steadily downgrade their forecasts for economic growth in the second quarter of this year. Macroeconomic Advisors, a prominent forecasting firm, on Wednesday lowered its annualized second-quarter gross domestic product forecast to 1.9 percent, compared with the 3.5 percent growth it was expecting when the quarter began.

Contributing reporting were Christine Hauser, Rachel Donadio, Niki Kitsantonis, Matthew Saltmarsh and Jack Ewing.

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Markets Stumble on Economic Data

June 15, 2011 by Leave a Comment

The downward trend was a complete reversal from Tuesday, when the three main indexes closed more than 1 percent higher, with the Dow Jones industrial average recording its biggest gain so far this month and raising hopes for a turnaround after six weeks of losses.

But on Wednesday, major protests in Greece over austerity measures renewed concerns about Europe’s debt troubles, and the United States government and Federal Reserve laid out new data on consumer prices, regional manufacturing and industrial production that generally failed to meet the forecasts of analysts. “We are pretty much giving back everything we got yesterday and more,” said Lawrence Creatura, a portfolio manager at Federated Investors. “Today the market just can’t escape the undertow of deteriorating economic data and political events.”

The euro, oil prices and Treasury yields also fell sharply on Wednesday.

“There is enough negative data that came out of the U.S. and the situation in Europe to warrant a conservative tone in the markets,” said Quincy Krosby, a market strategist for Prudential Financial. “The data underscores a soft patch, and the Greek issue has deteriorated.”

After having lost more than 200 points at one point during the day, the Dow Jones industrial average closed down 178.84 points, or 1.48 percent, to 11,897.27. The Standard Poor’s 500-stock index fell 22.44 points, or 1.74 percent, to 1,265.43 and the Nasdaq composite index average was lower by 47.26 points, or 1.76 percent to 2,631.46.

A Federal Reserve regional report for New York State showed a decline in both manufacturing activity and optimism for June. Nationally, consumer prices crept up in May at the slowest pace so far this year, according to government figures, and industrial production rose 0.1 percent last month, after no growth in April because of the Mississippi River flooding and the effects on business related to Japan, analysts said.

In Greece, thousands of people protested austerity measures, while Prime Minister George Papandreou proposed to step down so that his Socialist party could form a coalition government with the center-right opposition, but only if it would support a new bailout for the debt-ridden country.

Peter Cardillo, the chief market economist for Avalon Partners, said that equities were undergoing a technical correction that he predicted could be followed by a consolidation.

“Yesterday we got a little bit of good news and the market oversold,” he said. “Now the bad news comes again. So the technical correction is back in full force.”

All of the sectors of the broader market were lower by 1.24 percent or more, with financials and materials recording the heaviest declines at more than 2.3 percent declines.

Crude oil took a tumble, falling $4.41 to $94.96 a barrel for July delivery on the New York Mercantile Exchange.

Mr. Cardillo also noted that the Greece debt troubles were overshadowing other countries, as Moody’s Investors Service placed three of the largest French banks on review for a possible downgrade on concerns about their exposure to Greek debt.

“That will just keep the wall of worries on the front burners,” he said. “It is part of the picture, but is it the real reason?” he asked, referring to the market dive. “No.”

Article source: http://feeds.nytimes.com/click.phdo?i=63eb3c11599aab0691e70277dce53350

Filed Under: Business News Tagged With: , ,

Stocks Mixed on Lackluster Economic Data

June 2, 2011 by Leave a Comment

Stocks wavered in a narrow range at the open before heading lower as data showing stubbornly high jobless claims, and lackluster chain-store sales provided little reason to get back into the market after a string of weak economic data.

Bank stocks stabilized after falling on news that Goldman Sachs received a subpoena from New York prosecutors seeking information on the investment bank’s role leading into the global financial crisis. Goldman’s stock fell 1.1 percent to $134.72.

In addition, Moody’s Investors Service said Thursday that it was reviewing the ratings of the Bank of America, Citigroup and Wells Fargo for possible downgrades. Moody’s said that the assumption that the banks were too big to fail might no longer be true as the result of the Dodd-Frank Act.

Stock in the three banks was slightly higher, despite the warning.

At the close the Dow Jones industrial average was down 41.59 points, or 0.34 percent, at 12,248.55. The Standard Poor’s 500-stock index was down 1.61 points, or 0.12 percent, and the Nasdaq composite index was up 4.12 points, or 0.15 percent, at 2,773.31 percent.

Initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 422,000, while economists polled by Reuters forecast 415,000.

Investors were reluctant to make big bets ahead of the nonfarm payrolls data due on Friday, which was expected to show 150,000 jobs were added in May, according to a Thomson Reuters survey of economists.

Strength in education stocks sent the Nasdaq higher after officials in the United States softened new rules that could have cut off tuition aid to programs run by profit-making colleges.

Corinthian Colleges surged 29.6 percent to $5.18, and the Apollo Group rose 10 percent to $46.35.

Retail sales were higher last month, led by discount stores, but the increase was not as high as that in April and fell short of analysts’ forecasts as consumers continued to face an uncertain economy.

Sales at discount stores that have been open at least a year grew by 7.8 percent in May, the best showing by any group of retailers in terms of sales last month, according to a survey of 24 retailers released on Thursday.

But the overall measure of what are known as same-store sales, compiled by Thomson Reuters, rose 4.9 percent on average in May, slightly below the 5.4 percent that analysts had forecast. It was also below the 8.9 percent growth in April, which was one of the biggest increases in the index in the last few years.

Some of the bigger retailers fell. Target edged down 0.9 percent to $48.10, and Gap fell 3.2 percent to $18.30.

Article source: http://feeds.nytimes.com/click.phdo?i=544a9aeee78881594f2645d988269216

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