American stocks slump on recovery concerns
October 29, 2009
New York - United States stocks tumbled on Wednesday to their worst loss this month amid concerns over the pace of economic recovery following an unexpected decline in new home sales and dampening consumer sentiment.
The Dow Jones Industrial Average lost 119.48 points (1.21 percent) to finish at 9,762.69, a day after Wall Street closed mainly negative following a weaker-than-expected consumer confidence report.
The tech-heavy Nasdaq shed 56.48 points (2.67 percent) to 2,059.61 and the broad-market Standard & Poor's 500 index retreated 20.78 points (1.95 percent) to 1,042.63.
Stocks plunged on fears that the continuation of the economic recovery "may be stalling," exacerbated by an unexpected drop in new home sales, analysts at Charles Schwab & Company said in a note to clients.
"The uncertain economic backdrop is overshadowing a solid gain in durable goods orders and another round of better-than-expected earnings reports," they said.
US new home sales fell unexpectedly in September after five consecutive monthly increases, government data showed on Wednesday.
The Commerce Department said sales of new single-family homes dropped at a seasonally adjusted annual rate of 402,000 or by 3.6 percent last month from a revised 417,000 in August.
That was far below market forecasts of a level of 440,000 in September as analysts had expected sales to post their sixth consecutive monthly gain with builders benefiting from a federal tax credit for first-time homebuyers that expires at the end of next month.
Fresh data Wednesday showing new orders for US manufactured durable goods rising 1.0 percent in September hardly impacted the market, analysts said.
The new housing and durable goods numbers came ahead of the release on Thursday of the government's first estimate of third-quarter gross domestic product, or the output of goods and services in the world's largest economy.
Most analysts expect that GDP expanded 3.2 percent, the first growth for the United States after a year of quarterly contractions.
As bearish data led to economists slashing their GDP estimates, "traders decided to brace themselves for the worst ahead of tomorrow's preliminary GDP report, and most equities spent the day swimming in red ink," said Elizabeth Harrow of Schaeffer's Investment Research.
Among losing stocks Wednesday was Goodyear, the largest US tire maker, down 19.59 percent to 13.46 dollars as financial results at its key North American unit missed analysts' expectations even though the company as a whole posted better-than-expected quarterly profit.
Ford lost 5.05 percent to 6.96 dollars after it said that Chinese carmaker Geely was its "preferred bidder" for its Swedish unit Volvo Cars.
Oil group ConocoPhillips fell 2.77 percent to 49.49 dollars while lender CIT Group jumped 10.42 percent to 1.06 dollars after it received an additional 4.5 billion dollar loan as it tries to avoid bankruptcy.
The bond market rose amid the flight to safety by investors. The yield on the 10-year US Treasury bond fell to 3.411 percent from 3.462 percent Tuesday and that on the 30-year bond dipped to 4.243 percent against 4.289 percent. Bond yield and prices move in opposite directions. - AFP
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