-Caveat Lector-
Begin forwarded message:
From: [EMAIL PROTECTED]
Date: February 27, 2007 10:46:47 AM PST
To: [EMAIL PROTECTED]
Cc: [EMAIL PROTECTED], [EMAIL PROTECTED], [EMAIL PROTECTED]
Subject: US Economy: Blowing Bubbles
DOW DROPS 180 ON FEAR OF CORRECTION
By Madlen Read AP Business Writer
Associated Press, Feb. 27, 2007
http://www.chron.com/disp/story.mpl/business/topstory/4585773.html
NEW YORK — Wall Street fell sharply Tuesday, joining a global stock
decline sparked by growing concerns that the U.S. and Chinese
economies are cooling and that U.S. stocks are about to embark on a
major correction.
In midday trading, the Dow Jones industrial average was down
180.65, or 1.43 percent, to 12,451.61.
Broader stock indicators also fell sharply. The Standard & Poor's
500 index was down 22.27, or 2.06 percent, at 1,426.67, and the
Nasdaq composite index was down 54.57, or 2.18 percent, at 2,449.95.
A 9 percent slide in Chinese stocks earlier set the tone for U.S.
trading, a day after investors sent Shanghai's benchmark index to a
record high close.
Investors' confidence has been knocked down by a slew of data
showing that the economy may be decelerating more than anticipated.
A Commerce Department report that orders for durable goods in
January dropped by the largest amount in three months exacerbated
jitters about the direction of the U.S. economy, which were raised
a day earlier when former Federal Reserve Chairman Alan Greenspan
said the economy may be headed for a recession.
"It looks more and more like the economy is a slow growth economy,"
said Michael Strauss, chief economist at Commonfund, noting that
investors are expecting the government on Wednesday to revise its
estimate of fourth-quarter GDP growth down to an annual rate of
about 2.3 percent from an initial forecast of 3.5 percent .
"Moderate economic growth is good — an abrupt stop in economic
growth scares people."
The housing market, which the Street had been hoping was at a
bottom, also looked far from recovery after a Standard & Poor's
index indicated that single-family home prices across the nation
were flat in December. A later report from the National Association
of Realtors said existing home sales climbed in January by the
largest amount in two years, but the data didn't erase housing-
related concerns, as median home prices fell for a sixth straight
month.
A suicide bomber attack on the main U.S. military base in
Afghanistan where Vice President Dick Cheney was visiting also
rattled the market.
China's stock market plummeted Tuesday from record highs as
investors took profits when concerns arose that the Chinese
government may try to temper its ballooning economy by raising
interest rates again or reducing more of the money available for
lending.
"Corrections usually happen because of a catalyst, and this may be
it," said Ed Peters, chief investment officer at PanAgora Asset
Management. "The move in China was a surprise, and when a major
market has a shock it ripples through the rest of the market. With
all the trade that goes on with China, there tends to be a knee-
jerk reaction with that kind of drop."
The Shanghai Composite Index tumbled 8.8 percent to close at
2.771.79, its biggest decline since it fell 8.9 percent on Feb. 18,
1997. Since Chinese share prices doubled last year as investors
poured money into the market after the completion of shareholding
reforms, trading in Shanghai has been very volatile.
Hong Kong's benchmark Hang Seng Index dropped 1.8 percent, and
Malaysia's Kuala Lumpur Composite Index fell 2.8 percent. Japan's
Nikkei stock average fell a more moderate 0.52 percent, but
European markets were rattled — Britain's FTSE 100 was down 2.31
percent, Germany's DAX index was down 2.96 percent, and France's
CAC-40 was down 3.02 percent.
Bond prices rose as investors bought into the safe-haven Treasury
market, with the yield on the benchmark 10-year Treasury note
dropping to 4.60 percent from 4.63 percent late Monday. The bond
buying was sparked primarily by the durable goods orders, which the
Commerce Department said fell 7.8 percent, much more than what the
market expected.
The data raised the chances of the Federal Reserve easing interest
rates later in the year — a possibility that makes the bond market
an attractive place to be right now.
The hope for slowing inflation could be dashed, though, if energy
costs keep rising. Oil prices initially fell Tuesday on worries
that Chinese demand could be dampened should its economy slow down,
but later rose on escalating tensions in the Middle East. Crude
rose 48 cents to $61.87 a barrel on the New York Mercantile Exchange.
The dollar slipped against other major currencies, while gold also
fell.
The Dow has been climbing at a steady rate since last summer, but
over the past few trading sessions, stocks have pulled back on the
worry that the market is due for a correction. Many analysts have
noted that the Dow hasn't seen a 2 percent decline in more than 120
sessions.
Typically, data indicating a slow economy has given stocks a boost
on the hopes that the Fed will lower interest rates, which could
reinvigorate consumer spending and the struggling housing market.
But the market may fall further before that happens, analysts said.
"If in a week or two, the psychology in the U.S. market turns to
the realization that we're in a modest growth economy of 2 to 3
percent growth, that will help temper inflation pressures going
forward. If that perception evolves, there's an increase in the
likelihood that the Fed will be lowering rates rather than raising
rates. Structurally, it's a development that should be good for the
equity market, but it might be an event that unfolds after prices
are lower," Strauss said.
Declining issues outnumbered advancers by about 6 to 1 on the New
York Stock Exchange, where volume came to 806.42 million shares.
Stocks across all sectors fell, and every Dow component was down by
midday trading.
The Russell 2000 index of smaller companies was down 15.78, or 1.92
percent, at 807.91.
NYSE-listed shares of Chinese companies plunged. China Mobile Ltd.
tumbled $3.58, or 7.3 percent, to $45.70. Mindray Medical
International Ltd. dropped $2.46, or 8.6 percent, to $26.25. China
Eastern Airlines Corp. fell $5.07, or 15 percent, to $28.68.
On the Nasdaq, Internet company Baidu.com Inc. fell $4.44, or 4
percent, to $107.27. Shanda Interactive Entertainment Ltd., which
develops online games, fell 95 cents, or 3.8 percent, to $23.97.
Netease.com Inc. fell 68 cents, or 3.1 percent, to $21.13.
-----------------
CHINA DECLINE WORRIES WALL STREET
http://www.kndo.com/Global/story.asp?S=6147990&nav=menu484_2
NEW YORK Stock prices are decidedly lower in early trading. The Dow
Jones Industrial Average is down more than 120 points in today's
early going, after declines seen abroad.
The Nasdaq Composite Index is off more than 50 points and the
Standard-and-Poor's 500 Stock Index is down 18 points.
European markets were posting losses of more than two percent ahead
of the opening bell. The global weakness in stocks appears to have
been tipped off by the nearly nine percent decline in China's
benchmark index overnight. It was the biggest drop in nearly ten
years for the index, which doubled last year.
Japan's Nikkei average fell just one-half of one percent.
Additionally, worries about U-S growth prospects were fanned by the
weaker-than-expected report from the Commerce Department. Orders to
factories for big-ticket manufactured goods fell seven-point-eight
percent in January. Weakness was widespread, led by a drop in
demand for commercial airplanes.
Crude oil prices are lower this morning, in weakness also said
linked to concerns about the outlook for China.
Still to come today, reports are scheduled for release on consumer
confidence and sales of previously-owned homes.
Mortgage lender Freddie Mac says because of rapid deterioration in
the so-called subprime lending market, it will no longer buy some
high-risk mortgages.
Declining home sales and rising U-S interest rates have made it
harder for many Americans to make their mortgage payments, leading
to more defaults. That is seen especially true in the subprime
sector, where loans are made to borrowers who often have weaker
credit.
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