Kitsap Business and Economy

Dow at 10,414 this morning, down 12 points.

NEW YORK (AP) — Stocks fell Thursday after another series of disappointing reports made investors more pessimistic about the economy.
The Dow Jones industrial average fell more than 75 points, likely ending its seven-day winning streak, while all the major indexes were down moderately. Interest rates tumbled in the Treasury market as investors worried about the economy went in search of safe investments. The yield on the 10-year Treasury note dropped below 3 percent.
A day after the Federal Reserve issued a slightly more bleak outlook on the economy, two regional reports pointed to a slowing in manufacturing activity in the Northeast. Meanwhile, the Fed reported modest growth in industrial output nationwide. And the Labor Department said that first-time claims for unemployment benefits fell last week, but that was largely due to seasonal factors.
“We’ve hit a soft spot,” Howard Ward, chief investment officer at GAMCO Growth Fund, said of the economic recovery. “The question is, are we starting to already improve or are we still falling down.”
The disappointing manufacturing reports, which followed a weeklong stock rally, made the market “susceptible to profit taking,” Ward said.
There appeared to be a shift in investors’ view of the economy. They had been upbeat over the past week on more positive economic signs, in particular forecasts from companies including Intel Corp. and Alcoa Inc. But the latest disappointing numbers now seem to be dictating investors’ moves, and analysts questioned whether investors would start buying again if companies keep reporting strong earnings and outlooks.
Industrial companies like Caterpillar Inc., General Electric Co. and United Technologies Corp. all fell after the weak manufacturing reports.
JPMorgan Chase & Co., the first big bank to report its second-quarter earnings, said it had set aside less money to cover losses on failed loans. That is a sign that mortgage and loan defaults may be moderating. But CEO Jamie Dimon kept a cautious tone about future economic growth.
“Earnings are strong,” said Sandy Mehta, principal and chief investment officer of Value Investment Principals. “But the underlying economy is not as strong.”
In midday trading, the Dow Jones industrial average fell 76.28, or 0.7 percent, to 10,290.44. The Standard & Poor’s 500 index fell 8.93, or 0.8 percent, to 1,086.24, while the Nasdaq composite index fell 16.47, or 0.7 percent, to 2,233.37.
About three stocks fell for every one that rose on the New York Stock Exchange where volume came to 366.9 million shares.
Bond prices rose as investors sought safety the safety of government securities after the mixed economic reports. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.99 percent from 3.05 percent late Wednesday.
JPMorgan Chase fell 95 cents, or 2.4 percent, to $39.40. Caterpillar fell 93 cents to $65.77, while GE dropped 13 cents to $15.07. United Technologies fell 10 cents to $67.91.
The steep drops reported Thursday in the Empire State and Philadelphia Fed Manufacturing indexes dented optimism about the manufacturing industry, which had shown the most consistent growth coming out of the recession.
The Empire State index fell to 5.08, well below the 18.50 economists had predicted and the 19.57 reported last month. The Philadelphia Fed index dropped to 5.1 for July. Economists had predicted it would rise to 10.0.
The Fed’s report on industrial production showed output at the nation’s factories, mines and utilities rose by 0.1 percent in June, better than the 0.1 percent drop economists forecast.
Volatility spiked again in the market after the disappointing reports. The Chicago Board Options Exchange’s Volatility index, or VIX, jumped more than 5 percent.
“Volatility is definitely back in vogue,” said John Lekas, CEO of Leader Capital. The VIX is also known as the fear gauge and often rises when investors worry about the strength of the economy.
Lekas said that until unemployment comes down, the economy is likely to remain weak.
The Labor Department did say Thursday that initial claims for jobless benefits fell by 29,000 to a seasonally adjusted 429,000, the lowest level since August 2008. Economists polled by Thomson Reuters had predicted claims would drop to 450,000.
However, the claims could be skewed because General Motors and other manufacturers skipped their usual July shutdowns. Normally that would lead to temporary seasonal layoffs, which did not show up in the latest figures.
The Dow eked out a gain of 4 points Wednesday to extend its winning streak to seven days. However, the S&P 500 snapped its run of gains by falling less than 1 point.
The euro climbed above $1.28 for the first time in more than two months Thursday as investors worried about the strength in the U.S.
Overseas, Britain’s FTSE 100 fell 0.7 percent, Germany’s DAX index fell 1 percent, and France’s CAC-40 fell 1.4 percent. Japan’s Nikkei stock average fell 1.1 percent.

This entry was posted on Thursday, July 15th, 2010 at 9:00 am by Rachel Pritchett and is filed under Uncatagorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.