Markets Tumble as Grim Data Pile Up
Friday, November 7, 2008
Slumping retail sales and weakness in the auto sector helped send stocks plummeting again yesterday.
The second straight day of deep losses dashed traders' hopes that the market was stabilizing after weeks of volatility and sell-offs. The auto and technology sectors were hard hit after leaders in those industries, Toyota and Cisco, painted a dismal economic picture for the rest of the year. A significant drop in retail sales last month reinforced expectations that many shoppers will be skipping the malls this holiday season.
The Dow Jones industrial average was down 4.85 percent, or 443.48 points, closing at 8695.79. That followed a 5 percent, or nearly 500-point, loss Wednesday, giving the Dow its biggest two-day percentage drop since 1987. It is down 34 percent so far this year.
The Standard & Poor's 500-stock index fell 5.03 percent, or 47.88 points, to close at 904.89. The tech-heavy Nasdaq composite index was down 4.34 percent, or 72.94 points, closing at 1608.70.
With the presidential election decided, traders are now focused on economic woes and how the administration of President-elect Barack Obama will tackle them, analysts said. Traders "feel right now, regardless of who won, there is no quick-term solution to the global economic crisis. There is nothing that can happen that can save this holiday season," said Randy Cass, chief executive of First Coverage, a Boston firm that analyzes stock market recommendations made by brokerages and independent research firms.
The financial turmoil continued to drag down crude oil prices, which fell 7 percent, to $60.77 a barrel yesterday, its lowest level in more than a year. Falling prices have turned investor sentiment against the energy sector. Exxon Mobil fell 5.06 percent, to $69.96 a share, while Chevron slid 6.37 percent, to $70.11.
Investors were digesting another set of gloomy economic indicators yesterday that spanned industries and pointed to troubles in the labor market. Unemployment claims fell slightly last week, by 4,000, to a seasonally adjusted 481,000 but remained high by historical standards. The number of people continuing to receive benefits grew 122,000 to 3.8 million, the highest since 1983, according to Labor Department statistics.
"It has been at recession levels for months now," said Robert MacIntosh, chief economist for Eaton Vance, a Boston investment management firm.
The jobless-claims report added to investor anxiety ahead of the unemployment figures scheduled to be released by the government today. Analysts are expecting a loss of about 200,000 jobs but fear it could be more.
Automakers took among the biggest hits yesterday after Toyota slashed its revenue and profit projections for this fiscal year. The company's American depositary receipts fell 16.52 percent, to $67.09 a share.
Now analysts have turned their attention to troubled Detroit auto giants General Motors and Ford, which are scheduled to report earnings today. Ford fell 5.3 percent, to $1.98 a share, but General Motors led the Dow's decline, falling 13.7 percent, to $4.80.
The technology sector also turned down yesterday after bellwether Cisco said that revenue could fall 5 to 10 percent during the next quarter and that the softness it has seen in U.S. markets has moved to Europe and Asia. The seller of computer networking equipment said it would "pause" new hiring but is not planning any layoffs.
The company's results are watched by analysts as a measure of technology spending by corporations. Its stock fell 2.6 percent, to $16.94 a share.
Meanwhile, retailers posted dismal sales in October as the financial turmoil on Wall Street continued to take its toll on the nation's shoppers.