US shares fell Friday, marking the end of another miserable week of recession dominated trading, with a developing overtone of re-developing strains in the financial sector as Citigroup shares fell below $US10 twice last week.
Record low retail sales figures on Friday, on top of the news of the eurozone being in an official recession knocked confidence, especially when rumoured mounted that Citigroup was looking at sacking 10% of its staff, or around 30,000 people worldwide.
That was after another flood of job losses last week.
The Dow Jones fell 338 points, or 3.8%, the Standard & Poor’s 500 shed 4.1% and Nasdaq dropped after Sun Microsystems revealed that it would sack 16% of its work force, and phone giant, Nokkia cut its forecasts for next year, especially for phone sales.
All three major gauges slid on the week as well, with the Dow losing 5%, the S&P down 6.2% and the Nasdaq down 7.9%.
With November almost half over, the Dow has lost nearly 828 points, or 8.9% so far, while the S&P 500 has dropped almost 96 points, or 9.9%, and the Nasdaq has fallen about 204 points, or 11.9% as the tech sector catches up with the slump (Intel, Nat Semi, Sun etc reporting sliding earnings and cutting forecasts).
For the year to date, the Dow is down 35.9%, while the S&P 500 is down 40.5% and the Nasdaq is off 42.8%.
US retail sales in October posted the worst monthly decline since the Commerce Department initiated the current measurement standard in 1992: down 2.8%, including slumping cars and petrol sales (in value).
Excluding cars and petrol the fall was still a bigger than expected 2.2%.
US economists say that just based on the October retail sales alone, consumer spending this quarter will be down 5% or thereabouts in the US.
That’s making more and more retailers very worried about the festive season which is the biggest time of the year for retailers.
It starts Friday week, the day after Thanksgiving and economists now reckon it would produce the first negative sales figures for the season in 20 years or more.
Friday’s fall came after that illogical late surge Thursday which boosted the Dow 552 points higher, its third-best single-session point gain ever.
After the close, Fidelity, the US’s biggest mutual fund group, said it was cutting an additional 1,700 jobs early in the New Year after cutting 1,300 immediately a week earlier.
Also on Friday, retailers J.C. Penney and Abercrombie & Fitch both reported lower quarterly earnings and issued bleak forecasts for the critical fourth quarter.
Some analysts took a tiny bit of heart from a report which showed a slight improvement in consumer sentiment, according to the latest survey from the University of Michigan.
Sentiment rose to 57.9 in November from 57.6 in late October, versus forecasts for a decline to 57. In terms of what retail sales are telling us, it’s a small improvement of no consequence.
Other markets: Asian and European markets rose in reaction to Thursday’s surge on Wall Street. Futures markets have them lower today Our market is tipped to open down more than 1%, or around 60 points.
The Group of 20 statement was predictable and contained no real positive surprises.
European markets gained, trimming this week’s retreat in the Dow Jones Stoxx 600 Index. The Index added 0.8% by the close on Friday, trimming its loss this week to 6.3%.
National indexes advanced in all of the 18 western European markets on Friday except Finland, where Nokia’s downgrade forced the market lower.
London’s FTSE 100 added 1.5%; Germany’s DAX jumped 1.3% and France’s CAC 40 rose 0.7%,
Asian shares fell, ending a two-week rally, as companies lowered earnings forecasts amid mounting evidence economies are slowing.
The MSCI Asia Pacific Index lost 4.7% over the week. Financial and technology stocks had the biggest falls among the 10 industry groups.
Tokyo’s Nikkei lost 1.4% last week, but our ASX 200 Index dropped 7.5% as financials, commodity and industrial leaders took a pasting from the gloomy news.
But China’s markets rose as they had their best week since April, thanks to the Government’s $US586 billion two year spending package was revealed.
Resource, financial and property stocks rose in a rare reversal of recent weaknesses.
The CSI 300 Index which tracks Yuan-denominated A shares listed on China’s two exchanges, climbed 3.7% on Friday to end up 16% over the week.
In Australia Friday’s small gain will be reversed today and investors will be watching tomorrow’s Macquarie Group interim profit statement very closely to see how the financial group and bank is travelling.
The ASX/200 index was up 1.4%, or 52.3 points, at 3749.6, on Friday after being up more than 4% during the day. The All ordinaries Index climbed 1.5%, or 55 points, to 3727.4.
The Aussie dollar rallied in Sydney on Friday after it was revealed the Reserve Bank again intervened to boost the currency. It closed at 65.65 US cents Sydney and 64.80 US cents in New York.
The Commonwealth bank fell 20% last week to A$32.10 this week after it warned bad debts may double this year. Babcock and Brown slumped 52% to 48 cents, a record low on Friday.
In commodities, December Comex jumped $US42.50 on Friday to end at $US742.50 an ounce.
Nymex December WTI crude fell $US1.20 to settle at $US57.04 a barrel.
Oil prices closed mixed amid more signs of economic trouble in the US and Europe and despite the possibility of a new output cut from a new Organisation o
