The Star Online: Business
The Star Online: Business |
- US stocks fall on European economic, debt worries
- Oil falls on concern about German economy
- Gold prices climb on mounting economic concerns
| US stocks fall on European economic, debt worries Posted: 16 Aug 2011 05:49 PM PDT NEW YORK: Worries about Europe's economic and debt problems sent stocks Tuesday to their first loss in four days. The major indexes bounced up and down in another volatile day. The Dow Jones industrial average fell more than 120 points in the first half hour of trading after a report showed that Germany's economy stalled last quarter and dragged down growth for Europe. The Dow recovered and had a slight advance at midday, but resumed its drop after the leaders of France and Germany tried to calm worries about Europe's debt problems by pushing for long-term political solutions. Investors were hoping for immediate financial measures like the introduction of a single bond jointly backed by the eurozone's members. The Dow fell as many as 190 points in the early afternoon before again recovering. At the close, the Dow was down 76.97, or 0.7 percent, to 11,405.93. It was the first time in seven trading days that the Dow rose or fell by less than 100 points. The Standard & Poor's 500 index fell 11.73, or 1 percent, to 1,192.76. The Nasdaq composite fell 31.75, or 1.2 percent, to 2,523.45. "The real question the market is trying to answer is: Are we going to have another recession or not?" said John Burke, head of Burke Financial Strategies with $200 million in assets under management. "Today, the answer is maybe yes, because it doesn't look like Europe has figured out a solution to its debt." A proposal for a Europe-wide tax on financial transactions also hurt stocks, said Nick Kalivas, vice president at broker MF Global. "It's another slap in the face to the banking system" and would cut into profits and limit trading, he said. "The path toward economic growth still looks pretty uncertain." The day's trading showed how critical economic developments about Europe have become to U.S. investors. But Tuesday's losses were moderate and pointed to some stability in the market after the selling that sent the S&P 500 down 17 percent from July 21 to last Wednesday. In the U.S., economic reports Tuesday were mixed: Housing remains weak, but factory output rose last month at its fastest pace since an earthquake in Japan disrupted global manufacturing in March. "Investors don't know which way to go here," said Paul Brigandi, senior vice president of Direxion Funds, which has about $7 billion in assets under management. On one side, he said buying looks attractive because stocks are cheaper after the recent plunge.And more U.S. companies on Tuesday joined the stream of those that have reported earnings above analysts' expectations. But on the other side, selling looks appealing because of worries about the global economy and debt problems in the United States and Europe. Prices for gold and Treasurys rose as money moved into investments considered safer. Oil fell on worries that a weaker economy will mean less demand for energy. Fitch Ratings said Tuesday it will keep its credit rating on the United States at the top grade. Two of the three major credit-rating agencies now have stood by their AAA grade of U.S. debt. Standard & Poor's downgraded the U.S. on Aug. 5. That sent stocks on a volatile slide last week. Europe's economy and debt troubles have been among global investors' main concerns over the last year and a half. On Tuesday, the European Union reported that economic growth in the 17 countries that use the euro slowed to 0.2 percent between April and June from 0.8 percent the previous quarter. Germany's growth fell to 0.1 percent from 1.3 percent. That will make it even tougher for Spain and other countries to raise revenue. Some European countries have borrowed so much that they may need help repaying debt. French President Nicolas Sarkozy and German Chancellor Angela Merkel called for a "new economic government" for Europe and said all countries that use the euro should have mandatory balanced budgets and better coordination of economic policy. They also pledged to harmonize their corporate taxes to show they are "marching in lockstep" to protect the euro. In the U.S., the government reported that homebuilders are still stuck in their years-long slump. They broke ground on new homes at an annual rate of 604,000 last month, according to the Commerce Department. That's down from 613,000 in June. In 2005, before the housing bubble burst, housing starts were typically above 2 million. Manufacturing may be recovering. The Federal Reserve said industrial production rose 0.9 percent last month on a pickup at auto factories, utilities and mines. Manufacturing was one of the strongest industries after the recession ended in 2009, but its growth has slowed this year. Wal-Mart Stores Inc. rose 3.9 percent after it said net income rose 5.7 percent last quarter from a year ago on strong overseas sales. Earnings growth was stronger than analysts expected, and the world's largest retailer raised its profit forecast for the year. Home Depot Inc. rose 5.3 percent after it said second-quarter net income rose 14 percent and raised its profit forecast. Investors have largely ignored the strong earnings that companies have reported for the second quarter. Those in the S&P 500 index earned a record amount per share last quarter on an operating basis, which ignores one-time costs and other special items, according to S&P senior index analyst Howard Silverblatt. Investors have been overwhelmed by the market's volatility, said Tim Holland, portfolio manager of the Aston/Tamro Diversified Equity fund. "When you have these big swings, people completely lose focus on companies and their results. They're paying more attention to the market than the companies that make up the market. The earnings season was good and better than expected." Holland said companies also have healthier balance sheets than during the financial crisis of 2008. He has been buying stocks that are cheaper following the market's plunge. "We like to buy the best when they're depressed," he said. Energy stocks in the S&P 500 fell 1.7 percent after oil fell $1.23 per barrel to settle at $86.65. NYSE Euronext Inc. fell 8.4 percent for the biggest loss among stocks in the S&P 500 on worries that a possible European financial-transaction tax could hurt its profits. Saks Inc. fell 4.6 percent after it said it's going into the fall season "a bit more cautiously." Its higher-income customers have been spending more, because they're more protected from the weak job market than middle-income Americans. But the volatile stock market could hurt wealthy shoppers' confidence. The yield on the 10-year Treasury note fell to 2.22 percent from 2.31 percent late Monday as investors moved into things considered safer. A bond's yield falls when its price rises. The 10-year yield fell to a record low of 2.03 percent last week. Gold rose $27 per ounce to settle at $1,785. Last week, it rose above $1,800 for the first time. Nearly three stocks fell for every one that rose on the New York Stock Exchange. Trading volume at 4.5 billion was close to its average over the last year of 4.3 billion. The Dow rose 213 points Monday after a series of acquisitions led by Google's $12.5 billion purchase of Motorola Mobility. Its rise of 763 points over three days was the Dow's biggest since November 2008, during the depths of the financial crisis. On Wednesday stock markets in Australia and New Zealand have opened slightly higher following a subdued day of trading on Wall Street and in Europe. Australia's benchmark S&P/ASX 200 index was up 4.4 points, or 0.1 percent, to 4,251.7 in early morning trading on Wednesday. New Zealand's NZX 50 was up 5 points, or 0.3 percent, at noon. Stocks around the world lost their steam Tuesday after muted German growth figures reinforced fears over the global economy. - AP
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| Oil falls on concern about German economy Posted: 16 Aug 2011 05:42 PM PDT NEW YORK: Oil fell Tuesday on renewed concerns about Europe's biggest economy. Benchmark West Texas Intermediate crude for September delivery gave up $1.23 to finish at $86.65 per barrel on the New York Mercantile Exchange. Brent crude, which is used to price many international oil varieties, lost 71 cents to end at $109.13 per barrel on the ICE Futures exchange in London. Oil dropped early in the day after Germany said its economy nearly ground to a halt in the second quarter, growing only 0.1 percent from April to June. The report fell well below expectations and showed that Germany was not immune to the financial troubles plaguing its neighbors. A downshift in Germany's economy raises a number of concerns among investors. As Europe's largest economy, Germany is the strongest member of the European Union. If Germany struggles, it could impact the EU's ability to support weaker countries with financial aid. That means European credit troubles could spread elsewhere. Europe consumes more than 17 percent of the world's oil, so a slowdown could mean weaker global oil demand. "If Europe weakens further, we could be talking about a recession in the eurozone," independent analyst Jim Ritterbusch said. "That means a stronger dollar, and when that happens, it's usually bearish for oil." Oil, which is priced in U.S. currency, tends to fall as the dollar rises and makes crude more expensive for investors using foreign money. The report on the German economic overshadowed news of resurgent factory output in the U.S. The Federal Reserve said that U.S. industrial production grew in July at the fastest rate of the year. Meanwhile, drivers continue to pump less gas than a year ago. A weekly survey by MasterCard SpendingPulse showed that U.S. drivers have cut back on gasoline purchases for 21 consecutive weeks. SpendingPulse, which collects credit card data from thousands of stations around the country, said that drivers bought an average 386 million gallons per day last week, down 3.4 percent from the same period last year. "We haven't had much of a summer driving season," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service. Kloza said last week's turmoil on Wall Street may have rattled leisure travelers and cut down unnecessary driving. "People feel miserable when they hear about high unemployment," he said. "They feel miserable when the stock market crashes, and they feel really miserable when they see gasoline prices near a dollar more than last year." In other Nymex trading for September contracts, heating oil lost 1.15 cents to finish at $2.9326 per gallon and gasoline futures fell 2.07 cents to end the day at $2.8538 per gallon. Natural gas dropped 9.2 cents to $3.932 per 1,000 cubic feet. - AP Latest business news from AP-Wire Full Feed Generated by Get Full RSS, sponsored by Used Car Search. |
| Gold prices climb on mounting economic concerns Posted: 16 Aug 2011 05:40 PM PDT NEW YORK: Gold prices moved higher Tuesday as concerns deepened about the slowing European economy. Economic growth in Germany and France barely budged in the second quarter, according to a new European Union report. That could hurt the broader economy across the 17 countries that use the euro. The news reinforced concerns about demand for commodities in Europe, which also is dealing with sovereign debt problems in several countries. Gold for December delivery rose $27 to finish at $1,785 an ounce. The price has risen about 10 percent since Aug. 1, when worries began to mount about slower economic growth in Europe and the U.S. Investors buy gold because it's seen as a relatively stable asset to hold during uncertain economic times. It's also used as a hedge against currency movements and inflation. MF Global senior market strategist Rich Ilczyszyn is one of the analysts who believes gold could reach $2,000 an ounce, unless the global economy stabilizes and there is a clearer picture about growth in the months ahead. "It's perception and it's a fear-based trade and a very emotional trade if you will," he said of gold. "I think at some point cooler heads are going to prevail and you'll probably see traders go back into equities in some way." Other metals were mixed on the day. Platinum and palladium, which are used in automobile catalytic converters, rose after the Federal Reserve said factory production increased 0.9 percent in July, the biggest gain of the year. The auto industry accounted for most of the increase. September palladium rose $10.15 to finish at $756.50 an ounce and October platinum gained $20.90 to end at $1,818.10 an ounce. September silver added 51.2 cents to end the day at $39.819 per ounce. Copper, which is used in many construction materials, fell after the Commerce Department said July's new home construction dropped 1.5 percent from June to a seasonally adjusted 604,000 homes. September copper lost 3.8 cents to finish at $3.994 a pound. Wheat prices rose on concerns that the Northern Plains spring wheat crop would fall short of expectations, Global Commodity Analytics & Consulting LLC President Mike Zuzolo said. About 13 percent of the wheat in Idaho, Minnesota, Montana, North Dakota, South Dakota and Washington had been harvested as of Friday, the U.S. Agriculture Department said. That compared with 31 percent at the same time last year. About 66 percent of the crop was in good-to-excellent condition, compared with 82 percent a year ago, the agency said. Wheat for September delivery added 12.25 cents to finish at $7.2475 a bushel, December corn rose 7.5 cents to $7.275 a bushel and November soybeans fell 1.75 cents to $13.495 a bushel. Oil and other energy products were lower on concerns that demand may wane because of the slowing European economy. Benchmark West Texas Intermediate crude for September delivery dropped $1.23 to finish at $86.65 per barrel on the New York Mercantile Exchange. In other Nymex trading, heating oil lost 1.15 cents to finish at $2.9326 per gallon, gasoline futures dropped 2.07 cents to $2.8538 per gallon and natural gas fell 9.2 cents to finish at $3.932 per 1,000 cubic feet. - AP Latest business news from AP-Wire Full Feed Generated by Get Full RSS, sponsored by Used Car Search. |
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