Stocks Plunge , Friday 17 Nov 10 : Worst Day in Months

[Yip Hon]

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By Hibah Yousuf, staff reporter November 16, 2010: 4:49 PM ET

http://money.cnn.com/2010/11/16/markets/markets_newyork/index.htm







NEW YORK (CNNMoney.com) -- U.S. stocks tumbled Tuesday, with all three major indexes down nearly 2%, as investors cast a worried eye at economic developments in Europe and China.

The Dow Jones industrial average (INDU) finished 178 points lower, or 1.6%, with Alcoa (AA, Fortune 500) and Travelers Companies (TRV, Fortune 500) leading the blue chip index's decline. Earlier in the session, the Dow fell more than 200 points.

90Email Print CommentThe S&P 500 (SPX) fell 19 points, or 1.6%. The tech-heavy Nasdaq (COMP) lost 44 points, or 1.8%.

The Dow and the S&P posted the biggest one-day losses since Aug. 11 and Aug. 19, respectively. The Nasdaq's drop was the largest since Oct. 19.

The day's sell-off also puts all three indexes on track to post a decline for the month of November, erasing the gains logged after the Republican victory in the midterm elections and the Federal Reserve's announcement to pump $600 billion in to the economy.

Traders on Wall Street have been holding back on buying recently, as they await more clarity on the economic outlook for the United States, Europe and China.

As a result, investors have been taking their cues from daily economic indicators, and have been keeping a close eye on debt auctions in fiscally challenged countries such as Ireland.

"The concerns about the global economy, with the fiscal situation in Ireland, are clearly back on the table," said Peter Tuz, president at Chase Investment Counsel. "There's a little bit of nervousness out there."

Irish prime minister Brian Cowen outlined in a speech on Tuesday the steps that his government has been taking to stabilize the Irish economy and reduce the deficit. Most importantly, as far as investors are concerned, he said that his country will not be seeking a bailout.

"Ireland has made no application for external support," he said.

Investors had braced themselves for news of an Irish bailout and its potential threat to economic stability.

The persisting global economic woes have helped lift the dollar. The dollar index, which measures the buck against a basket of foreign currencies, rallied 0.9%. Earlier, the index touched 79.46, the highest level since Sept. 28.

The stronger buck weighed on commodity prices and the energy sector, Tuz said.

Exxon Mobil (XOM, Fortune 500) fell more than 2% Tuesday and was among the biggest losers in the Dow. Massey Energy Company (MEE), Peabody Energy (BTU, Fortune 500) and Valero Energy Corp. (VLO, Fortune 500) all shed about 3%, while Consol Energy (CNX, Fortune 500) dropped almost 5%. They were among the biggest laggards on the S&P 500.

The companies also lost traction as investors worried that China's efforts to curb the nation's growth would add stiff pressure on energy prices and future earnings, Tuz said.

Meanwhile, retail stocks moved higher after major players posted healthy profits and strong forecasts for the fourth quarter, which includes the all-important holiday shopping period, with Wal-Mart (WMT, Fortune 500), Home Depot (HD, Fortune 500) and Urban Outfitters (URBN) leading the advance.

Stocks ended mixed Monday, after an early advance on merger news gave way to jitters about the economy.





Companies: Wal-Mart (WMT, Fortune 500), the world's largest retailer, reported earnings per share of 95 cents. Excluding charges, Wal-Mart met forecasts. But the retailer missed on sales, reporting net sales of $101.2 billion versus forecasts of $102.3 billion. Wal-Mart also hiked its outlook for the year. Shares rose about 0.6%.




Buffett dumps Home Depot

Home Depot (HD, Fortune 500) reported third-quarter earnings of 51 cents per share, topping forecasts by three cents. But the home improvement company lowered its full-year sales outlook. Shares of Home Depot jumped 1%.

General Motors announced an increase in the target price and size of its initial public offering. The target share price for common stock moved to $32 to $33 from its previous estimate of between $26 and $29 per share. As a result, the total size of GM's IPO is now expected to be close to $16 billion.

Clothing retailer Abercrombie & Fitch (ANF) announced third-quarter earnings per share of 56 cents, topping analyst expectations by 5 cents per share. Shares rose 0.8%.


0:00 /1:02Retailers rally head of holidays


Economy: A government report on the latest Producer Price Index was delivered before the bell. The report is considered an important reading on the price of goods at the wholesale level. A report on industrial production is also expected Tuesday.

Producer prices rose 0.4% in October, matching the growth rate for the previous two months, but falling short of analyst expectations. The measure had been forecast to have risen 0.8% for October, according to a consensus of economists surveyed by Briefing.com.

Excluding energy prices, the so-called core PPI decreased by 0.6%. It had been expected to be flat at 0.1%.

Economists expect industrial production rose 0.3% in October, after a 0.2% decline in output the month before, according to the consensus estimate from Briefing.com.

World markets: European stocks fell after a report showed consumer prices in the eurozone rose at their fastest pace in two years, hiking inflation fears. Britain's FTSE 100 ended 2.4% lower, the DAX in Germany lost 1.9% and France's CAC 40 declined by 2.6%.

Asian markets ended lower. The Shanghai Composite suffered heavy losses, closing down nearly 4% on continued inflation worries. The Hang Seng in Hong Kong edged 1.4% lower, and Japan's Nikkei slid 0.3%.

Currencies and commodities: The dollar strengthened against the euro, British pound, and the Japanese yen.

The dollar index, which measures the buck against a basket of foreign currencies, rose 0.9%. The stronger dollar has weakened commodity prices.



Bonds: All eyes on inflation


Oil for December delivery fell $2.52, or 3%, to $82.34 a barrel. Gold futures for December delivery fell $28.50 to $1,340 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 2.84% from 2.91% late Friday.

CNNMoney.com staff writer Aaron Smith contributed to this report.

 

[dysentry]

charts look like they're rolling over, some way to go yet

 

[Coolsaint77]

I know it felt like Friday but it is not

 

[Yip Hon]

.

I know it felt like Friday but it is not

thks bro



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Stocks sink on Asian inflation, Euro debt fears
Stocks fall on worries about rate hikes in Asia, possible bailouts in Europe; Dow off 175



http://sg.finance.yahoo.com/news/Stocks-sink-on-Asian-apf-2395909032.html?x=0




Share




Stephen Bernard and David K. Randall, AP Business Writers, On Wednesday

17 November 2010, 10:15 SGT


NEW YORK (AP) -- Stocks fell for a fourth day Tuesday as concerns over a slowdown in China and talks about a bailout for Irish banks combined to push the Dow Jones industrial average to its largest one-day loss since August.

Asian markets started a global sell-off after South Korea's central bank raised interest rates to curb inflation. Shares also fell in Shanghai and Hong Kong as speculation spread that China will take more steps to control the pace of its rapidly-growing economy, which would dampen global demand for industrial goods.

"The fact that China is taking actions to tighten things up over there is having a big ripple effect here," said Bruce Simon, the chief investment officer at Ballentine Partners.

In Brussels, European finance ministers ended a meeting without an agreement to bail out Ireland. However officials there said they're moving ahead with preparations to support the country's troubled banks.

The Dow Jones industrial average fell 178.47, or 1.6 percent, to 11,023.50. It dipped below 11,000 during the day for the first time since Oct. 20. Wal-Mart Stores Inc. and Home Depot Inc. were the only two companies to rise among the 30 stocks that make up the Dow.

The Standard & Poor's 500 index fell 19.41, or 1.6 percent, to 1,178.34. The Nasdaq composite index fell 43.98, or 1.8 percent, to 2,469.84.

All 10 industry groups in the Standard and Poor's 500, the index followed by most professional money managers, fell. Companies in the materials and energy industries lost the most ground. Both groups fell more than 2 percent.

Commodities prices also fell sharply as investors shed riskier assets and anticipated weaker demand for basic materials from China. The dollar jumped 0.9 percent against an index of six other currencies as investors sought safety.

Stock indexes have risen sharply since October following strong corporate earnings reports and the introduction of a $600 billion stimulus plan by the Federal Reserve. Some investors may have taken the global economic concerns as an opportunity to sell.

As Asian countries dealt with excessive economic growth and inflation, European finance ministers discussed a bailout for Ireland's banks in hopes of preventing another crisis of confidence in Europe's financial system. The country has so far refused any outside financial assistance.

A fiscal crisis in Greece resulted in a global swoon in stock prices in May as investors questioned the ability of European nations to protect the value of their shared currency, the euro. Greece had to be bailed out by fellow European nations and the International Monetary Fund.

Ireland's situation is different from Greece's, but their respective debt crises are having similar effects on markets. As new doubts emerge about Europe's ability to keep its financial system sound, investors are abandoning the euro, flocking to the dollar, dumping risky assets like stocks and commodities and sending borrowing rates for countries they see as credit risks soaring.

The yield on 10-year Irish bonds rose to 8.25 percent from 7.94 percent late Monday. Yields rise as bond prices fall. Higher yields are a sign that investors are demanding more money for their willingness to take on the risk of lending to that country. In contrast, the yield on the 10-year U.S. Treasury note edged down to 2.85 percent from 2.95 percent.

Greece fell into a fiscal crisis after runaway spending and a lack of trust from investors as a result of revelations that the government had published faulty budget figures. Ireland is staggering under the costs of nationalizing three banks after that country's real estate boom imploded.

"It's been simmering for a while," Scott Brown, chief economist at Raymond James & Associates, said of the European debt problems. "Now it's coming to a complete boil."

Brown said Ireland is more troublesome for Europe than Greece because more of Ireland's debt is held by major banks, especially in England. A default by Ireland could be another blow to banks that have only recently recovered from the global credit crisis. Shares of British banks HSBC and Barclays PLC both fell 3 percent.

There are also fears that if Ireland needs a bailout, it will spook investors who hold debt from other European countries.

Ireland is a "precursor to Spain," said Quincy Krosby, a market strategist at Prudential Financial. "It's a precursor to Portugal" as well.

Basic materials companies, which have benefited from the booming demand from China, were among the biggest losers in U.S. trading. Freeport-McMoRan Copper & Gold Inc. fell 4.3 percent, Alcoa was off 2.8 percent, and Monsanto Co. was off 2.4 percent.

Commodities prices fell as investors worried that a slowdown in Asia would dampen demand for agricultural products and metals. Agricultural commodities like corn, soybeans and wheat all fell by more than 5 percent. Gold fell 2.2 percent to $1,338.30, while silver fell 3.2 percent to $25.22.

Shares fell overseas. The Stoxx 50 index, which tracks blue chip companies in Europe, fell 2.5 percent. Japan's Nikkei fell 0.3 percent, and China's Shanghai composite index fell 4 percent.

Six stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 5.2 billion shares.
1,239 commentsShow: Newest FirstOldest FirstHighest RatedMost Replied

 

[Yip Hon]

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charts look like they're rolling over, some way to go yet

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http://sg.finance.yahoo.com/echarts?s=%5EDJI#symbol=^dji;range=2y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;



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i like this 2 year chart


check out the 5 yr chart

 

[Yip Hon]

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http://sg.finance.yahoo.com/echarts?s=%5EDJI#symbol=^dji;range=2y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;


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[Coolsaint77]

I live in the days where Dow was 7000+ points to 9000+ points, that wasn't very long ago. Wall Street is so good at lying. Shares like Apple and Google are valued dono how far ahead of current earnings. Not surprised at all at this drop. Can afford to shave off a lot more.

 

[Yip Hon]

I live in the days where Dow was 7000+ points to 9000+ points, that wasn't very long ago. Wall Street is so good at lying. Shares like Apple and Google are valued dono how far ahead of current earnings. Not surprised at all at this drop. Can afford to shave off a lot more.

>




What are Business Cycles (Economic Cycles)
and What Causes Them?




The business cycle is something you will frequently hear economists mention. It is often discussed in relation to a countries economic performance or how markets are behaving on a global scale. It seems to be quite an important concept so what does it actually refer to?


What is the Business Cycle?

The business cycle is also sometimes referred to as the economic cycle. It is concerned with the fluctuations that occur in an economy over a period of time. The economic cycle typically occurs over a few years and will involve a period of rapid economic growth after which things slow down and then growth declines. The term ‘business cycle’ would seem to suggest that this process is predictable and constant but this is not the case; in fact these business cycles can be very unpredictable. One of the main ways that a country’s business cycle is tracked is through observing changes in GDP.

The business cycle is often said to go through four stages; expansion, peak, contraction, and trough. During expansion there is an increase in the amount of economic activity occurring in a country and this continues until the peak of activity is reached. After the peak the economy begins to go through a period of contraction and economic activity begins to slow down; this continues until the trough where the bottom of the cycle is reached and economic activity once again begins to expand. This business cycle is a fair representation of what occurs in economies but it is important to keep in mind that the real world is a lot more complicated and these cycles can really be unpredictable.

What Causes a Business Cycle?

There are complex reasons for why the business cycle occurs but it can be explained in quite a simple manner as well. As an economy expands it and there is rapid economic growth it almost always leads to inflation and things just become more expensive to buy. The rising costs cause industry to slow down their growth and this leads to the economic contraction. This is why governments often apply a lot of effort to controlling inflation because it is that that often precipitates and economic slowdown.

The business cycle is a useful theory and helps people understand what is occurring in economies around the world. It should be remembered though that when it comes to the real world that economies will not follow a predictable cycle.



>

 

[silverfox@]

I live in the days where Dow was 7000+ points to 9000+ points, that wasn't very long ago. Wall Street is so good at lying. Shares like Apple and Google are valued dono how far ahead of current earnings. Not surprised at all at this drop. Can afford to shave off a lot more.

They have zero debts, and that's a reason why people believe in them in a financial environment like US today. Inflated prices maybe but Apple has quite a strong finance reserve

 

[Dodomeki]

Rising Yields Help Fed Raise Inflation Expectations With QE2


Bloomberg

Rising Yields Help Fed Raise Inflation Expectations With QE2

<cite>By Liz Capo McCormick</cite><cite>
</cite>
Nov. 16 (Bloomberg) -- The Federal Reserve said Nov. 3 that it would start to buy $600 million of Treasuries “to help ensure that inflation, over time, is at levels consistent with its mandate.” Bond yields suggest that is already happening.

Inflation expectations as measured by government securities of all types are on the rise. The difference in yields between short- and longer-maturity Treasuries has widened to the most since June. Rates on bonds that protect against rising consumer prices show investors are preparing for an increase.

The worst financial crisis since the Great Depression has made sustained price declines, which makes consumers and businesses less willing to spend or invest, a bigger concern to the Fed than faster inflation. For policy makers, the way to spark inflation is to increase the supply of money in the economy by purchasing bonds.

“The Fed clearly wants to have a certain amount of inflation in the system,” said Jeffrey Gundlach, founder and head of Los Angeles-based DoubleLine Capital LP, which manages $6.8 billion in assets. That is happening as “you’ve seen significant movements in every currency appreciating against the dollar, metals going crazy, the stock market going on a tear to the upside.

And the TIPS market has gone from a year-to-date through August trend of lower, and lower inflation to suddenly turning around to higher, and higher inflation expectations.” The difference between yields on 2- and 10-year Treasury notes steepened to 2.45 percentage points, the widest in four months, as investors demand extra compensation to hold longer- maturity debt, which typically gets hurt the most when inflation accelerates.

Breakeven Rate

The difference in yields between 10-year Treasury Inflation Protected Securities and comparable Treasuries have expanded to 2.05 percentage points from the year’s low of 1.47 percentage points on Aug. 25. The difference is the rate of inflation investors expect over the life of the securities. The Standard & Poor’s 500 Index rose 11.5 percent in the same period.

“To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the committee decided today to expand its holdings of securities,” the Open Market Committee said on Nov. 3 after their policy meeting in Washington where Fed Chairman Ben S. Bernanke unveiled the $600 billion in purchases.

The yield on the benchmark 10-year note climbed to as high as 2.96 percent today from the low this year of 2.33 percent on Oct. 8. It was at 2.94 percent as of 1:08 p.m. in New York, according to data compiled by Bloomberg. The yield climbed 33 basis points, or 0.33 percentage point, the prior two days, the biggest jump since January 2009.

Preferred Measure

While a quarterly Bloomberg Global Poll last week of 1,030 investors, analysts and traders who are Bloomberg subscribers showed that 56 percent said the plan won’t boost growth, half said it will help avoid deflation.

The personal consumption expenditures index excluding food and energy, which is the Fed’s preferred gauge for consumer prices, rose 1.2 percent in September from a year earlier, the smallest increase since 2001. Fed policy makers have a long-run goal of 1.7 percent to 2 percent inflation that they see as consistent with achieving legislative mandates for maximum employment and stable prices.

“Despite the Fed’s purchases, Treasuries remain pressured on post QE2 ‘sell on the fact’ and on speculation that QE2 may lead to inflation,” wrote Jane Foley, a senior currency strategist at Rabobank International in London in a note today.

Yields to Rise

The central bank is trying to boost growth after near-zero interest rates and $1.7 trillion in securities purchases during its first round of quantitative easing helped pull the economy out of recession without bringing joblessness below 9 percent.

“Ten-year Treasury yields will begin to pick up slightly now, and be in a continuous higher trend,” said Fabrizio Fiorini, head of fixed income at Aletti Gestielle SGR SpA in Milan, who manages about $8 billion in assets. “You have to discount that the Fed will be successful, so you should be selling Treasuries.”

At the same time, the flow of credit to businesses hasn’t slowed. Speculative-grade bond sales in the U.S. rose to $11.5 billion last week, the most since the period ended Sept. 24, according to data compiled by Bloomberg.

The extra yield investors demand to own corporate bonds rather than Treasuries ended yesterday at 2.64 percentage points, down from 2.81 percentage points at the end of September and 3.17 percentage points in June. In the leveraged, or high- yield, loan market, prices have surged to 92.38 cents on the dollar, from 88.35 cents at mid-year, based on the S&P/LSTA US Leveraged Loan 100 Index.

Bernanke Letter

A group including former Republican government officials and economists urged Bernanke in a letter published today to stop his expansion of monetary easing, saying it risks an inflation surge. Federal Reserve Bank of New York President William Dudley said critics of the expansion of monetary stimulus are underestimating the central bank’s ability to raise rates when necessary.

“People do not understand clearly” that “we can have an enlarged balance sheet and not have a long-term inflation problem,” Dudley said in an interview with CNBC yesterday. “We are very confident of our ability to exit when the time comes.”

The Thomson Reuters/Jefferies CRB Index of commodities has rallied 13 percent since Bernanke indicated in an Aug. 27 speech to central bankers in Jackson Hole, Wyoming, that he was prepared to pump more cash into the economy. The U.S. Dollar Index, a gauge of the greenback against six counterparts, slumped 4.3 percent in that time period.

Producer Prices

Debt purchases will equal about a 0.75 percentage-point cut in the federal funds rate, according to the Fed’s internal estimates. The central bank has kept the rate in a range of zero to 0.25 percent since December 2008. The producer price index climbed 0.4 percent from the prior month, Labor Department figures showed today in Washington. Economists projected a 0.8 percent rise in October, according to the median estimate in a Bloomberg News survey.

The so-called core measure, which excludes volatile food and energy costs, decreased 0.6 percent, the most since July 2006. Consumer prices, the broadest of the three measures, probably climbed 0.3 percent in October and the core index had the smallest year-over-year advance since 1961, according to the Bloomberg survey. Those figures are due tomorrow.

That may not last long, based on bond yields. The Fed’s so- called five-year five-year forward breakeven inflation rate, derived from yields on both nominal and TIPS, has risen to 3.07 percent, from as low as 2.18 percent in August, the least since January 2009. The forward rate gives a signal of what investors expect for five year inflation rates in five years time.

Fed purchases “are the only game in town in terms of giving the economy a little bit more oomph and I think everyone knows that we need more,” Alan Blinder, a Princeton University professor and former Fed vice chairman, said during a Bloomberg Television interview today. “The problem now is inflation is too low.”

--With assistance from Caroline Salas in New York. Editors: Dave Liedtka, Robert Burgess

To contact the reporter on this story: Liz Capo McCormick in New York at [email protected].

To contact the editor responsible for this story: David Liedtka at [email protected]