The bears put a stop to a string of winning days on the stock market Friday, pushing the Dow 170 points into the red to close out the month of August. The selloff came even though oil prices ended the day in the red, failing to rise on the looming threat of Hurricane Gustav.
Today's Market
The Dow Jones Industrial Average slid 171.22 points, or 1.46% to 11543.96, the Standard & Poor’s 500 dropped 17.85 points, or 1.37%, to 1282.83 and the Nasdaq Composite lost 44.12 points, or 1.83%, to 2367.52. The FOX 50 declined 15.62 points, or 1.68%, to 914.98.
WallStreet found little reason to buy stocks heading into the holiday weekend as the market was spooked by a mixed batch of economic reports and Dell's (DELL) warning of slower tech spending. Friday's selloff reverses a string of wins on the Dow, which had closed in the green for six out of the prior seven trading sessions, adding some 340 points over that span.
General Motors (GM) and Intel (INTC) led the way down on the Dow, falling about 3% each. All 30 components of the Dow ended the day in the red, with insurer AIG(AIG) feeling the least pain, closing just slightly lower.
Wall Street will likely take the day's losses with a grain of salt as volume was very low on the New York Stock Exchange as many traders took money off the table ahead of Labor Day weekend. The NYSE didn't see a day with volume above 1 billion shares this week, contrasting with a typical day's volume of 1.3 billion.
The bears grasped onto a Commerce Department report that showed personal income sank by 0.7% in July -- the largest one-month slide in almost three years. Economists had been expecting a more modest 0.1% decrease. The incomes decline comes at a time when the labor market has weakened considerably and the impact of the government's economic stimulus checks has faded.
The Commerce Department also said personal spending slowed down last month, growing by just 0.2%. Consumer spending is vitally important to economic growth as it accounts for more than two-thirds of the nation's GDP.
While those reports signaled trouble ahead for the economy, the Reuters/University of Michigan consumer sentiment index improved this month to a reading of 63 as gasoline prices tumbled. Economists had been expecting a reading of 62 from July's 61.2 level.
The Nasdaq Composite suffered worse losses than the broader market, diving almost 2% following Dell's (DELL) worse than-expected quarterly loss, which was announced late Thursday. Not surprisingly, Dell led the decliners on the Nasdaq 100, plunging nearly 14%.The news weighed heavily on tech giants like BlackBerry maker Research in Motion (RIMM) and Oracle (ORCL).
Dell, the world's second largest PC maker, posted an adjusted-profit of 33 cents per share, missing analyst expectations by three cents. The company spooked the market by saying it sees declining tech spending in the U.S., a trend it says could spread to Europe and Asia.
The stock market was unable to stage a rally even after crude oil prices erased a rally to close flat. Crude ended up 14 cents to $115.46 a barrel. This marks the second consecutive day where oil prices were unable to make headway despite the looming threat of Hurricane Gustav, which could enter the oil-rich Gulf of Mexico as a category 3 or 4 hurricane.
The energy market kept oil prices from catching fire as many believe the government would open the Strategic Petroleum Reserve if needed.Also, the greenback advanced against rivals, helping to push down the price of dollar-traded commodities like oil.
Corporate Movers
Delphi Corp., the auto parts giant and partner of General Motors (GM), may face liquidation, The Wall Street Journal reported. The No. 1 global auto parts supplier hasn't been able to emerge from bankruptcy protection and may cease to exist as a stand-alone company, the newspaper reported. GM, Delphi's former parent company, could be forced to take over some ofDelphi's plants and find itself on the hook for billions of dollars of its pension plan, according to the Journal.
Boeing (BA) could be facing a strike from its largest labor union after the International Association of Machinists said it will recommend to its members to turn down the defense giant's contract proposal. Boeing had called the offer its "best and final" offer and its rejection could signal a strike for next week. The IAM represents 27,000 workers and a strike could squeeze Boeing by $3 billion a month.
Microsoft(MSFT) unveiled a deal to acquire Greenfield Online (SRVY), a European price comparison company and owner of ciao.com, for $486 million. The move is aimed at improving Microsoft's online business, especially after it failed to acquire Internet giant Yahoo! (YHOO) earlier this year. Microsoft said Ciao has 26.5 million visitors a month, according to ComScore.
Alitalia, Italy's national airline, filed for bankruptcy protection on Friday. It's the first move toward restructuring and downsizing the company. Earlier this week Italy's government changed a law tailored for Alitalia's situation, according to Reuters.
World Markets
The Dow Jones Euro Stoxx 50 Index, an index that tracks the 50 largest companies in Europe, rose 6.21 points, or 0.18%, to a reading of 3365.63. London's FTSE 100 Index, added 35.40 points, or 0.63%, to 5636.60.
On the European continent, the CAC 40 Index in Paris picked up 21.11 points, or 0.47%, to 4482.60 while Germany's DAX gained 1.76, or 0.03%, to 6422.30.
In Asia, Tokyo's Nikkei 225 benchmark index rose 304.62 points, or 2.39% to 13072.87. The Hong Kong's Hang Seng Index added 289.60 points, or 1.38%, to 21261.89
