Wall Street's recovery hopes hit more turbulence on Friday as a surprise decline in consumer sentiment spooked the markets, pushing them to their first losing week in more than a month.
Today’s Markets
The Dow Jones Industrial Average fell 76.79 points, or 0.82%, to 9321.40, the Standard & Poor's 500 dropped 8.64 points, or 0.85%, to 1004.09 and the Nasdaq Composite slid 23.83 points, or 1.19%, to 1985.52. The consumer-friendly FOX 50 tumbled 3.76 points, or 0.51%, to 733.08.
The worse-than-expected sentiment data, coupled with Thursday's unexpected drop in retail sales, raise doubts about the economic recovery that Wall Street has been betting on all summer. The Dow had soared 15% over the past four weeks, ending at nine-month highs as recently as Thursday.
“I think it’s a market getting tired. We’ve had a spectacular run. I personally believe it would be very healthy for the market to pull back by 10%,” NYSE trader Ben Willis of VDM Institutional Brokerage told FOX Business.
The markets ended well off their worst levels as the Dow had been down 166 points before a round of late-day buying. Still, Friday's selloff sent the Dow to its first losing week since the second week of July.
But the losses were minor when compared to the recent run up. The Dow fell just 48 points this week and had been on track to close in the green until Friday's tumble. By contrast, the benchmark index surged 1252 points during its recent rally on signs the U.S. economy is slowly recovering.
Nearly every single Dow stock lost ground on Friday, led by DuPont (DD), Alcoa (AA) and Boeing (BA). Defensive stock Coca-Cola (KO) and Bank of America (BAC) bucked the trend, ending in the green.
The Nasdaq Composite tumbled nearly 1.5% as tech stocks like Adobe (ADBE) and eBay (EBAY) fell sharply.
Even the bears remain dubious about the chances the summer surge will turn into a late summer selloff.
“I still think the uptrend is in place. It’s going to be tough to fight this,” said Joe Saluzzi, co-head of trading at Themis Trading, who still believes the markets will retest their March lows. “As bearish as I am, I will not fight it. But I will remain suspect and still not believe it.”
Friday's selloff began after the Reuters/University of Michigan preliminary consumer sentiment index was released, showing sentiment fell to 63.2 in August, down from 66 the month before. Economists expected sentiment to tick up to 70 as news about the economy has improved.
Wall Street closely follows sentiment data as consumer spending accounts for more than two-thirds of the U.S. economy. Consumer discretionary stocks like Ford (F) and Macy's (M) tumbled on the report.The disappointing sentiment data comes just a day after the Commerce Department said retail sales unexpectedly fell 0.1% last month.
The markets had a more muted reaction to the latest tame consumer price data, which suggested inflation is still not a threat to the U.S. economy in the short term. The Labor Department said its consumer price index was unchanged in July from the prior month, matching economists’ expectations. However, consumer prices are off by 2.1% from a year ago, the largest annual drop in 59 years.
The tame CPI report should ease fears about a spike in inflation hurting an economic recovery and should also give the Federal Reserve flexibility as it begins to unwind one of the greatest interventions in history.
Commodity markets followed Wall Street into the red this week as crude oil settled at two-week lows amid the gloomy consumer data. Ending a four-week rally, crude fell $3.01 a barrel, or 4.27%, on Friday to settle at $67.51.
Corporate Movers
BB&T (BBT) plans to buy Colonial Bank’s (CNB) deposits after the Federal Deposit Insurance Corporation seizes the Southern bank, Dow Jones Newswires reported. Colonial’s seizure would mark the largest bank failure of the year.
Boeing (BA) has halted work at an Italian plant that makes the fuselage of its new 787 Dreamliner aircraft amid new production flaws, The Wall Street Journal reported. It’s not clear how the latest snag will affect production of the airliner, which is already two years behind schedule.
J.C. Penney (JCP) beat the Street with break-even EPS for the second quarter and an in-line sales decrease of 7.9%. However, the department store operator issued a weaker-than-expected outlook for the current quarter and cautious guidance for 2009.
Abercrombie & Fitch (ANF) swung to a loss of 30 cents per share amid a 30% plunge in same-store sales. However, A&F said its revenue slid 23% to $648.5 million, topping the Street’s view.
Autodesk (ADSK) saw its shares climb 5% as Wall Street cheered the software maker’s better-than-expected earnings and in-line guidance. The Adobe (ADBE) rival said late Thursday its net income plunged 88% but posted an adjusted-profit of 24 cents a share, easily topping analysts’ forecast.
Barnes & Noble (BKS) tumbled 9% after Credit Suisse downgraded the largest U.S. bookseller to “underperform.” The analysts slammed the company’s $596 million acquisition of Barnes & Noble College Booksellers, saying the deal “makes little sense” in the long term.
Republic Airways (RJET) was picked by a bankruptcy court judge over Southwest Airlines (LUV) as the winning bidder for Frontier Airlines. Republic's $108.75 million bid beat out Southwest's $170 million bid after Southwest's pilot union was unable to reach an agreement with its Frontier counterparts.
Blackstone (BX) CEO Stephen Schwartzman was named 2008’s highest paid executive by the Corporate Library after the buyout firm chief took in a reported $702 million in compensation and stock equity grants that vested last year. Blackstone disputed the calculations by the Corporate Library.
Data Dump
The Federal Reserve said industrial production rose 0.5% in July, just shy of the 0.6% analysts had expected. It was the first up tick in production since October and just the second since the recession began at the end of 2007.
Global Markets
European markets closed in the red, snapping their four-week win streak. England's FTSE 100 fell 0.87% to 4713.97, France's CAC 40 lost 0.83% to 3495.27 and Germany's DAX dropped 1.70% to 5309.11.
Asian markets closed mixed overnight as Japan's Nikkei 225 rallied 0.76% to 10597.33 and Hong Kong's Hang Seng advanced 0.15% to 20893.33 but China's Shanghai Composite dropped 2.98% to 3046.97.
Stocks End Mixed; Microsoft PlungesNew jobless claims rise unexpectedly to 558,000
