Global Economic Worries Continue To Weigh On Wall Street
10/9/2012 12:08 PM ET
With traders expressing continued concerns about the global economic outlook, stocks have moved notably lower during trading on Tuesday. The markets are extending the downward move that was seen over the course of the previous session.
The major averages have climbed off their worst levels in recent trading but remain firmly in negative territory. The Dow is down 83.13 points or 0.6 percent at 13,500.52, the Nasdaq is down 44.93 points or 1.4 percent at 3,067.42 and the S&P 500 is down 11.58 points or 0.8 percent at 1,444.30.
News that the International Monetary Fund lowered its global growth forecast has helped to drag stocks lower, with the lender warning that the risks for a serious global slowdown are alarmingly high.
In its World Economic Outlook, the IMF lowered its global growth forecast for 2012 to 3.3 percent from 3.5 percent, while its 2013 forecast was trimmed 0.3 percentage points to 3.6 percent.
Peter Boockvar, managing director at Miller Tabak, noted that the lower forecast is not a surprise but said it "highlights the growing economic risks that were temporarily put aside by the actions of central bankers over the past few months."
"For U.S. investors, earnings/guidance over the next 3 weeks will certainly bring the reality front and center for better or worse," he added.
After the close of trading, aluminum giant Alcoa will kick off the earnings reporting season with the release of its third quarter results.
Analysts expect Alcoa's third quarter earnings to fall to $0.01 per share from $0.15 per share in the year-ago quarter amid forecasts for a 13 percent drop in revenues to $5.6 billion.
A research note from Capital Economics said the earnings news is "likely to be downbeat, with the annual growth rate of profits reportedly expected to be negative for the first time since 2009."
"In recent months investors have shrugged off this prospect and sought solace in the Fed and the ECB," the firm added. "But history is not on the side of those who expect the market to continue to prosper once the earnings cycle has turned."
Traders also continue to keep an eye on Europe, where finance ministers are holding a second day of meetings after formally launching the European Stability Mechanism on Monday.
Along with the finance ministers meeting in Luxembourg, German Chancellor Angela Merkel has traveled to Athens, where she was greeted by thousands of protesters.
Sector News
Technology stocks are turning in some of the market's worst performances on the day, as reflected by the steep drop by the tech-heavy Nasdaq.
Within the tech sector, internet stocks are seeing considerable weakness, dragging the NYSE Arca Internet Index down by 2.3 percent. Netflix and Baidu are posting notable losses.
Significant weakness among computer hardware, semiconductor, and networking stocks is also helping to drag the sector lower.
Outside of the tech sector, housing stocks are also seeing substantial weakness, resulting in a 2.1 percent drop by the Philadelphia Housing Sector Index. The index is adding to the 1.5 percent loss that it posted in the previous session.
Airline, healthcare provider, and tobacco stocks have also come under pressure, moving to the downside along with most of the major sectors.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Tuesday. While Japan's Nikkei 225 Index ended the day down by 1.1 percent, Hong Kong's Hang Seng Index rose by 0.5 percent.
Meanwhile, the major European markets all moved to the downside over the course of the trading day. The U.K.'s FTSE 100 Index fell by 0.5 percent, while the French CAC 40 Index and the German DAX Index slid 0.7 percent and 0.8 percent, respectively.
In the bond market, treasuries are regaining some ground after coming under pressure last week. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5.2 basis points at 1.694 percent.
| Canadian Market |  | | CADUSD | Oil | Gold | Allbanc |  |  |  |  | | Please click on the images to view our interactive charts | | Canadian stocks were extending losses for a second session Tuesday morning amid global growth concerns as the International Monetary Fund cuts its global growth forecasts. The world economy will grow 3.3 percent this year, the slowest since the 2009 recession, and 3.6 percent next year, the IMF said, compared with July predictions of 3.5 percent in 2012 and 3.9 percent in 2013. The S&P/TSX Composite Index surrendered 111.71 points or 0.90 percent to 12,307.28, after losing nearly 30 points in the previous session. In the commodities market, the price of crude oil was moving higher Tuesday morning amid reports that China's central bank has injected a large dose of liquidity into the banking sector. However, the IMF's warning of risks to global growth was capping gains. Crude for November delivery added $1.17 to $90.50 a barrel. In the oil patch, Niko Resources (NKO.TO) lost nearly 4 percent, while Rubiales Energy (PRE.TO) was down 3 percent. Gold stocks were under selling pressure as the price of bullion was retreating from its 11-month high as the euro was struggling to sustain gains amid uncertainty about Spain's bailout and concerns about Greece. Gold for December shed $5.00 to $1,770.70 an ounce Franco-Nevada (FNV.TO) lost nearly 3 percent. Royal Gold (RGL.TO), Barrick Gold (ABX.TO), Seabridge Gold (SEA.TO) and Allied Nevada Gold (ANV.TO) were down about 3 percent each. Entertainment technology company Imax Corp. (IMX.TO) was down about 3 percent and BlackBerry maker Research In Motion (RIM.TO) lost close to 4 percent. Natural gas dealer Keyera Corp. (KEY.TO) announced that Dean Setoguchi, its Vice President and Chief Financial Officer, is resigning to pursue another opportunity. The stock slipped 1 percent. Meanwhile, biotechnology company Thallion Pharmaceuticals (TLN.TO) soared 30 percent after it swung to profit in third quarter, reporting net income of $3.7 mln or $0.12 per share compared to a net loss of $0.9 mln or $0.03 per share in the comparable quarter last year. Gold miner Centamin Plc (CEE.TO) gained 2 percent after reporting d preliminary quarterly production from its Sukari Gold Mine in Egypt rose 20 percent to 60,922 ounces from the year-ago quarter. In economic news, Canada Mortgage and Housing Corp said housing starts slowed, with seasonally adjusted annualized rate of housing starts coming in at 220,215 units in September, compared with 225,328 units in August. The August figure was revised up from 224,900 units reported previously. The number of starts in September was above the economists' forecast for 207,500 starts.. From the euro zone, U.K. industrial output declined 0.5 percent in August from a month ago, when it rose 2.8 percent, the Office for National Statistics showed. The rate of decline matched economists' expectations. Manufacturing output, at the same time, was down 1.1 percent, following a 3.1 percent rise in July. The month-on-month fall exceeded the 0.7 percent decrease forecast by economists. Meanwhile, data released by the Office for National Statistics showed the U.K.'s trade in goods resulted in a higher-than-expected deficit in August. The visible trade deficit widened to GBP 9.8 billion in August from GBP 7.3 billion in July. Economists expected a deficit of GBP 8.5 billion. |
| European Market | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Please click on the images to view our interactive charts | | European Markets Closed Mostly Lower Amidst Concerns Over Global Growth The majority of the European markets finished Tuesday's session in negative territory after the International Monetary Fund cut its global growth estimate for this year as well as the next. Stepping up its warning against deteriorating economic conditions across the globe, the International Monetary Fund on Tuesday said the risks for a 'serious global slowdown are alarmingly high.' Investor concerns regarding the region's debt crisis also lingered, on a day when German chancellor Angela Merkel arrived in Greece, her first visit since the crisis began. Greek trade unions have called for strikes in protest against Germany's tough stance with regard to the bailout reforms. Greece's creditors on Monday allotted ten days to the country to fulfill the reform pledges before deciding on the next loan tranche of 31.5 billion euros. At the same time, the euro area ministers hailed the fiscal consolidation efforts of the coalition government led by Antonis Samaras, raising hopes of a positive decision at the upcoming EU summit. Also, at the Eurogroup meeting held in Luxembourg on Monday, euro area finance ministers officially launched the European Stability Mechanism , the single-currency bloc's 500-billion euros permanent bailout fund. Eurozone finance chiefs also endorsed the latest austerity measures announced by the Spanish government and indicated that the aid for Spanish banks from ESM will likely start in November. European Central Bank President Mario Draghi on Tuesday said the euro area economy faces more risks to growth and is expected recover only gradually. "We expect weak economic activity in the near term and only a very gradual recovery after that," Draghi said during a hearing at the Committee on Economic and Monetary Affairs of the European Parliament in Brussels. Meanwhile, the International Monetary Fund said there is still scope for lowering interest rates after it slashed its growth forecast for the 17-nation economy. The real GDP growth of the euro area is projected to decline by 0.4 percent in 2012, steeper than the 0.3 percent contraction projected earlier. GDP is expected to grow 0.2 percent in 2013, slower than the 0.7 percent expansion projected earlier. According to the report, the "core" economies are expected to see low but positive growth throughout 2012-13. Most euro area "periphery" economies are likely to suffer a Sharp contraction in 2012, constrained by tight fiscal policies and financial conditions, and to begin to recover only in 2013. The euro Stoxx 50 index of eurozone bluechip stocks declined by 1.11 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.54 percent. The DAX of Germany dropped by 0.78 percent and the CAC 40 of France fell by 0.70 percent. The FTSE 100 of the U.K. decreased by 0.65 percent and the SMI of Switzerland finished down by 0.10 percent. In Frankfurt, Siemens finished down by 0.82 percent. Chevreux raised Siemens to ''Top Pick'' in European Capital Goods. Metro fell by 2.21 percent, after Barclays reduced its rating on the stock. Leoni declined by 4.43 percent, following a broker downgrade. ElringKlinger climbed by 1.44 percent, after HSBC raised its rating on the stock. In Paris, Vinci rose by 1.49 percent, after Morgan Stanley raised its rating on the stock. Veolia Environnement dropped by 2.15 percent, after HSBC downgraded the stock to "Neutral" from "Overweight." In London, Barclays finished down by 0.36 percent. The company agreed to buy the deposits, mortgages and business assets of ING Direct UK, to expand its retail business. Rio Tinto said it is more cautious on the outlook over the next few quarters, citing ongoing volatility in its short-term macroeconomic outlook. The stock increased by 1.52 percent. Vedanta Resources advanced by 1.99 percent and Anglo American gained 0.60 percent. Aggreko declined by 3.41 percent, after HSBC downgraded the stock to "Neutral" from "Overweight." Swiss private banking group Julius Baer is targeting to reduce pro forma combined staff base of around 5,700 in over 50 locations by 15 to 18 percent. The stock finished lower by 0.86 percent. Givaudan, a Swiss manufacturer of fragrance and flavor products, reported over 14 percent increase in sales for the third quarter with double-digit growth in both its divisions. The stock climbed by 0.65 percent in Zurich. France's trade deficit for the month of August increased from a year ago and came in slightly above economists' expectations, data released by the Customs Office showed Tuesday. The foreign trade deficit widened to EUR 5.286 billion from EUR 4.894 billion in the same month last year. Economists had forecast a deficit figure of EUR 5 billion. U.K. industrial output declined 0.5 percent in August from a month ago, when it rose 2.8 percent, the Office for National Statistics showed Tuesday. The rate of decline matched economists' expectations. Manufacturing output, at the same time, was down 1.1 percent, following a 3.1 percent rise in July. The month-on-month fall exceeded the 0.7 percent decrease forecast by economists. The U.K.'s trade in goods resulted in a higher-than-expected deficit in August, data released by the Office for National Statistics (ONS) showed Tuesday. The visible trade deficit widened to GBP 9.8 billion in August from GBP 7.3 billion in July. Economists expected a deficit of GBP 8.5 billion. |
| Asia Market | Asian Markets Mostly Trade In Positive Territory Asian stock markets are mostly trading higher on Tuesday with investors shrugging off weak cues from the U.S. as well as European markets and indulging in some bargain hunting after recent losses. However, gains are just modest in most of the markets in the region with a section of investors treading cautiously at higher levels amid renewed concerns about the global economic outlook. In the Australian market, energy, mining, industrial and healthcare stocks are trading higher. Financial and property trusts stocks too are finding support, while consumer staples are trading mixed. The benchmark S&P/ASX 200 index is up 28.1 points or 0.6 percent at 4,510. The broader All Ordinaries index is trading at 4,530, up 28 points or 0.6 percent from its previous close. Top miners BHP Billiton (BHP, BBL) and Rio Tinto (RIO, RIO.L) are up 1 percent and 1.8 percent, respectively. Among energy stocks, Woodside Petroleum and Oil Search are trading higher by 1.6 percent and 4 percent, respectively. Among bank stocks, Westpac and National Australia Bank are trading modestly higher, while ANZ Bank and Commonwealth Bank of Australia are up 1 percent and 0.6 percent, respectively. Bendigo & Adelaide Bank is up marginally and Bank of Queensland is trading slightly weak. Seven West Media, extending recent gains, is up 4.5 percent. Fortescue Metals is up 4 percent. Oil Search, Spark Infrastructure Group and Monadelphous Group are trading higher by 3.2 to 4 percent. Aristocrat Leisure, Atlas Iron, UGL, Commonwealth Property Office Fund, Cochlear, Qantas Airways, Myer Holdings, Beach Energy and Stockland are all trading higher by 1.5 to 3 percent. Alumina , Arrium and Bluescope Steel are down 3 to 4 percent. Dexus Property Group is down with a loss of 1.6 percent. In economic news, confidence among business improved in September although it still remained a bit downbeat. National Australia Bank said its business confidence index rose from minus three points to zero in the month. At the same time, the business conditions index fell from zero to minus three points. In a statement on Tuesday, NAB said moves from the U.S. Federal Reserve and the European Central Bank to stimulate their respective economies had helped lift confidence. Stocks opened lower in the Japanese market with investors tracking weak cues from the U.S. as well as European markets and pressing some sales in early trades. However, the market regained some lost ground towards the end of the morning session thanks to some modest buying at lower levels in a few front line stocks. Shares from glass & ceramics, automobile, rubber, paper & pulp, land transport and non-ferrous metals sectors drifted lower. Real estate, financial and automobile stocks found some support early on, but came off their highs subsequently. The benchmark Nikkei 225 index, which declined to around 8,800, was down 32 points or 0.4 percent at 8,831.3 at the end of the morning session. Among the prominent losers in the Nikkei index, Sharp Corp. was down by over 8 percent, Trend Micro lost around 5.4 percent, Mitsui OSK Lines and Dainippon Screen Manufacturing drifted down by around 5 percent, and Nippon Paper Group was down 4.8 percent. Nisshin Steel, Chubu Electric Power, Kansai Electric Power, Mitsumi Electric, Nomura Holdings, Pioneer Corp., Softbank Corp., Sumitomo Mitsui Trust Holdings, Advantest Corp. , Pacific Metals and Japan Tobacco too declined sharply. Meanwhile, GS Yuasa Corp., Tokyo Dome, Resona Holdings, Eisai Co., Nippon Light Metal Holdings, Ricoh, Mitsubishi Estate, Sumitomo Heavy Industries, Mitsui & Co. and Dainippon Sumitomo Pharma gained 2 to 4.4 percent. Nippon Steel & Sumitomo Metal Corp., Sumitomo Realty & Development, Nippon Sheet Glass, Takeda Pharmaceutical, Sumitomo Corp., Tokio Marine Holdings and Chughai Pharmaceutical also moved higher. On the economic front, Japan saw a current account surplus of 454.7 billion yen in August, the Ministry of Finance said on Tuesday, up 4.2 percent on year. That beat forecasts for a surplus of 421.1 billion yen (down 3.7 percent), but declined from the surplus of 625.4 billion (-40.6 percent) yen in July. The trade balance reflected a deficit of 644.5 billion yen, missing forecasts for a shortfall of 628.6 billion yen after showing a 373.6 billion yen deficit in the previous month. Exports were down 5.3 percent on year in August, while imports dipped 5.4 percent. In the currency market, the U.S. dollar traded in the lower 78 yen range in early deals in Tokyo. The yen is trading at 78.32 to the dollar. Among other markets in the Asia-Pacific region, Shanghai and Hong Kong are trading sharply higher. Indonesia and South Korea are up with modest gains. Malaysia, Singapore and Taiwan are up marginally, while New Zealand is trading slightly weak. On Wall Street, stocks ended mostly lower on Monday, amid renewed concerns about the outlook for the global economy following the World Bank cutting its growth outlook for the East Asia region. While the Dow ended down 26.5 points or 0.2 percent to 13,583.7, the Nasdaq closed lower by 23.8 points or 0.8 percent at 3,112.3 and the S&P 500 drifted down 5 points or 0.4 percent to 1,455.9. Major European markets too closed weak on Monday. While the U.K.'s FTSE 100 index lost 0.5 percent, the German DAX index and the French CAC 40 Index ended lower by 1.4 percent and 1.5 percent, respectively. U.S. Crude oil ended lower for a second straight day on Monday, mainly on global demand growth concerns after a World Bank report on Asia forecast slowdown in China's economic growth. Crude for November delivery ended down $0.55 or 0.6 percent at $89.33 a barrel on the New York Mercantile Exchange, after touching a low of $88.21 a barrel intraday.
| Forex | | | | USDCAD | USDEUR | USDGBP | USDJPY |  |  |  |  | | Please click on the images to view our interactive charts | | Euro bears dominated proceedings in early deals Tuesday as the European Central Bank President Mario Draghi drove the currency bulls away from risky bets by stating that the European economy continues to face challenges.
During a hearing at the Committee on Economic and Monetary Affairs of the European Parliament, Draghi said the bank expects weak economic activity in the near term and only a very gradual recovery thereafter.
Downside risks to euro area economic outlook are mainly related to the tensions in several euro area financial markets. Draghi also said that fiscal consolidation could hurt growth in short - term.
He said the central bank welcomes the European Commission's proposal for a Single Supervisory Mechanism, or SSM, as well as the possibility of the involvement of non-EU members in the SSM.
According to Draghi, the establishment of SSM is a key step in facilitating full implementation of fiscal consolidation and structural reforms as well as financial sector reforms, along with the completion of a genuine economic and monetary union.
The International Monetary Fund has cut its global growth estimate for this year to 3.3 percent from the 3.5 percent estimated earlier in July, saying prospects have deteriorated further and risks have increased.
Eurozone is expected to shrink 0.4 percent this year, with the economy expected to rebound and expand by 0.2 percent in 2013, the IMF said in its latest World Economic Outlook unveiled in Tokyo ahead of the IMF-World Bank 2012 Annual Meetings.
Meanwhile, the Eurogroup meeting held in Luxembourg yesterday officially launched the European Stability Mechanism, or ESM, the single-currency bloc's 500-billion euros permanent bailout fund.
Chinese central bank injection of a large dose of liquidity into the banking sector helped offset the negative sentiment generated by the IMF warning.
The People's Bank of China injected CNY265 billion into its interbank system via reverse repos in open-market operations today, its first such move following the eight-day Golden Week national holidays.
The euro shed almost 70-pips or 0.35 percent against the US dollar during Draghi's Panel discourse, falling to a 6-day low of 1.2908 around 3:45 am ET. The recent corrective rally for the pair from the 1.28 area seems to have ended and the pair has shed almost 1.25 percent thus far from its post-NFP high of 1.3072 hit last Friday.
The European shared currency also suffered a 70-pip drop against the yen after Draghi's speech, slipping to a 6-day low of 101.04 around 3:45 am ET. The near-term bias is bearish for the pair as it is approaching support around the 100.10 level where the neck-line of a double-top reversal stands.
The euro erased previous session's gains against the Swiss franc in early deals, pulling back to below 1.21 from the Asian session's 3-week high of 1.2146. The euro-franc pair has been maintaining its speculative gains since the beginning of the previous month at which the market began talking that the Swiss National Bank would lift the current EUR/CHF ceiling of 1.20 to 1.22 or 1.25.
The single currency pulled back after having touched a tad above the key 0.81 against the pound in late Asian deals. The cross shed almost 35-pips surrounding Draghi. The probability of re-testing the 0.8050 support is visible in the near-term.
U.K. industrial output declined 0.5 percent in August from a month ago, when it rose 2.8 percent, the Office for National Statistics showed today. The rate of decline matched economists' expectations.
Manufacturing output was down 1.1 percent following a 3.1 percent increase in July. The month-on-month fall exceeded the 0.7 percent decrease forecast by economists.
U.K.'s trade in goods resulted in a higher-than-expected deficit in August, data released by the Office for National Statistics showed today.
The visible trade deficit widened to GBP 9.8 billion in August from GBP 7.3 billion in July. Economists expected a deficit of GBP 8.5 billion.
Exports of goods fell 4 percent month-on-month to GBP 24.6 billion in August. Imports, meanwhile, increased 4.5 percent to GBP 34.5 billion. |
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