Stocks fall for third day on increase in jobless claims, foreclosures
Stocks fell on Wall Street for the third day after more disappointing corporate earnings reports and government economic data flowed in from around the world.
In the United States, the number of people filing unemployment claims jumped unexpectedly to a level not seen since February. The number of homes lost to foreclosures in July surged 6 percent from a year ago. And Cisco Systems Inc., Sara Lee Corp. and Kohl's all disappointed the market with revenue estimates that were not what analysts had forecast.
After falling 110 points in early morning trading, the Dow Jones industrial average was only off by 79 points in the early afternoon.
Asian markets fell slightly and European ones were mostly stable Thursday after a global sell-off the previous day over worries about the weakening U.S. recovery and cooling Chinese economy.
"There's an increasing amount of palpable fear that there's not going to be organic growth," said Jim Grefenstette, senior portfolio manager at Federated Investors. "We think there'll be more headwinds than tailwinds, and that'll continue to drive growth down for the economy and for earnings."
He said that consumers have been paying down their credit card debts and shunning larger mortgages. Without debt-related spending driving economic growth, he said he thinks it's harder to feel better about company earnings.
The Labor Department said Thursday that initial claims for jobless benefits--which economists use to measure the pace of layoffs and corporations' willingness to hire--edged up by 2,000 to a seasonally adjusted 484,000 while analysts had expected a small drop.
Bernie McGinn, founder and CEO of McGinn Investment Management in Alexandria, said that despite the negative data about corporations over the past 24 hours, "in terms of the doomsday scenario, it's difficult to fathom with the amount of cash these companies have."
He doesn't think unemployment will come down during the next couple of months, but at some point che says ompanies will have to start putting their cash to work on hiring and that's when the market will begin doing better.
There was more bad news this morning from the housing sector. Foreclosure listing firm RealtyTrac Inc. said lenders repossessed 92,858 homes in August--the eighth month in a row that the pace has increased.
The Obama administration has announced a number of programs to help distressed homeowners--including an additional $3 billion toward that goal Wednesday--but has not made much progress in making a dent in the problem.
Overnight, two other important economies--Greece and India--announced disappointing growth numbers. Greece's recession deepened as the economy shrank by 1.5 percent in the second quarter of 2010 compared to the first quarter, while India said industrial production fell to a 13-month low in June.
European markets were steady but South Korea's Kospi fell 2.1 percent, Japan's Nikkei was down 0.9 percent and Hong Kong's Hang Seng dropped 0.9 percent.
"The market is again factoring in the possibility of a double dip recession," said Hank Smith, chief investment officer at Haverford Investments in Radnor, Pa.
-- Ariana Eunjung Cha and Sonja Ryst
Ariana Eunjung Cha and Sonja Ryst
August 12, 2010; 12:16 PM ET
Categories: U.S. Economy
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