05 Sep 2008 | 09:21
Wall Street Closed Sharply Lower On Economic Worries
Stocks on Wall Street turned in a dismal performance after a pair of
disappointing employment reports raised concerns about the health of
the economy. The tone during the trade was pessimistic from the start,
which aggravated further after Fisher gloomy economic forecast also
gave investors cause for concern, sending the Dow Jones down more than
340 points.
The
major averages saw further selling pressure in the final hour of
trading, with the Nasdaq ended the session at its intraday low. With
the declines, the majors closed at their worst levels in well over a
month.
The Dow closed down 344.65 points or 3% at 11,188.23,
the Nasdaq closed down 74.69 points or 3.2% at 2,259.04 and the S&P
500 closed down 38.16 points or 3% at 1,236.82.
Going in details,
a vast majority of the Dow components ended the session with notable
losses, sending the blue chip index sharply lower. Financial stocks
contributed to the weakness in the Dow, with Bank of America, Citigroup
and AIG seeing some of the worst declines. Bank of America closed down
7.2%, while Citigroup ended the session down 6.7%. AIG saw a decline of
6%.
Caterpillar also saw significant selling pressure, hurt by
the deepening economic worries. Shares of the heavy machinery
manufacturer dropped 5.6 %, adding to notable declines seen in the past
three sessions. With the decline, the stock set a seven-month closing
low.
Credit card issuer, American Express posted a substantial
loss as well. The stock fell 5.3%, pulling back off of a six week
closing high set in the previous session. General Motors fell 5.2 %
after GMAC Financial Services, which is partly owned by GM, said
Wednesday that it would close all of its 200 retail mortgage offices
and lay off about 5,000 employees at its mortgage lending division.
Other
Dow components that saw notable declines include Boeing, Intel and
Verizon. Boeing closed down 4.6 %, Intel closed down 4.7 % and Verizon
closed down 4.2 %.
Meanwhile, Wal-Mart ended the day nearly
unchanged after the discount retailer reported solid same store sales
in August. Coca-Cola closed slightly higher as well. Shares of the
beverage maker ended the session up 0.1 %, bouncing off of a monthly
closing low set in the previous session. On Wednesday, Coca-Cola
announced that it has offered to buy juice-maker China Huiyuan Juice
Group for $2.5 billion.
At Nasdaq, Networking stocks saw
significant selling pressure. Ciena led the networking sector lower
after the company provided a disappointing fourth quarter revenue
forecast. Ciena said it expects fourth-quarter revenue in a range of
$190 to $210 million compared to analyst estimates of $263.02 million.
The stock closed down 24.9 %, at its worst closing level in well over a
year.
On the economic front, the Automatic Data Processing (ADP)
set a negative tone before the markets opened when it released its
report on employment in the private sector, showing a bigger than
expected loss of jobs in the month of August. The ADP report showed
that non-farm private sector employment fell by 33,000 jobs in August
following a revised increase of 1,000 jobs in July. Economists had
expected employment to fall by 30,000 jobs compared to the increase of
9,000 jobs originally reported for the previous month.
Soon after
ADP released its report, the Labour Department said that jobless claims
in the week ended August 30th rose to 444,000 from the previous week's
revised figure of 429,000. Economists had expected jobless claims to
fall to 420,000 from the 425,000 from the originally reported for the
previous week.
On the upside, weak labour conditions help limit
inflation. Yet that theme was ignored as labour costs inched 0.5% lower
in the second quarter. Also helping stymie inflationary pressure,
productivity increased 4.3%, up from the previously stated 2.2%.
Adding
to the negative sentiment, Dallas Federal Reserve Bank President
Richard Fisher stood by his gloomy economic forecast, calling for
sluggish economic growth for some time into 2009 before the economy
gets back on track. He also cautioned that there is a distinct risk
that inflation will become embedded and be more than a one-off event.
Meanwhile,
San Francisco Federal Reserve Bank President Janet Yellen noted that
the housing and credit crunch that has left the economy in a state of
turmoil over the last year are ongoing and perhaps deepening. She
offered favourable prognosis on inflation, however, stating that it
will likely moderate in the face of slowing economic growth.
Prior
to this the stock markets across the Asian region closed lower after
Wall Street finished mixed overnight. Japan?s Nikkei 225 index traded
below the unchanged line throughout the session before closing down 1 %
on worries about an economic slowdown and uncertainty about the
country's political outlook.
The major European markets ended the
day lower as well. While the German DAX Index and the French CAC 40
Index fell 3.2 % and 2.9 %, respectively, the U.K?s FTSE 100 Index saw
a decline of 2.5 %.
On the economic front, the Bank of England
kept its benchmark interest rate unchanged at 5 % at its September
meeting. The ECB also held interest rates steady at 4.25 % at its
September meeting after maintaining rates at that level at the previous
meeting. The last revision in rates was in July, when the central bank
raised rates by 25 basis points.
In Currency market, the dollar's
resurgence in recent sessions has been attributable to fears of slower
global economic growth. It climbed 0.7% against a basket of major
foreign currencies this session. At about 5:10 p.m ET, the greenback is
trading at 1.4231 versus the euro, 1.7602 against the pound, 0.6670
versus the kiwi, 0.8148 against the Aussie and 1.1152 versus the franc.
Looking
ahead, all eyes will be on the Labour Department when it releases its
monthly employment report for the month of August. Following the dismal
employment data released earlier on Thursday, investors are wearily
looking forward to the monthly report.
Visit site at - http://investorline.co.in/
Newsroom -
http://newsroom.investorline.co.in/
Learning
Center- http://learning.investorline.co.in/
Mutual
funds - http://mutualfunds.investorline.co.in/
Life Insurance - http://insurance.investorline.co.in/
Investor
Journal - http://research.investorline.co.in/
Investor
Forums- http://forums.investorline.co.in/
