RTTNews - After showing a lack of conviction early on, stocks have turned negative and are posting moderate losses in mid-afternoon trading on Friday. The major averages are all in the red in reaction to disappointing consumer sentiment data.
Consumer sentiment in the month of July has deteriorated by much more than anticipated, according to a report released by Reuters and the University of Michigan, with the decrease likely due in part to concerns about the labor market.
In an interview with RTTNews, Jack Ablin, chief investment officer at Harris Private Bank, discussed the market's sluggishness, saying it is a result of investors wanting tangible evidence of improvement, rather than a slowing of the slowness.
Ablin called the recent decline in consumer sentiment disturbing, though he said he is not worried that the market, which has been gaining on recovery hopes, is overvalued. I do think that the market is probably fairly priced, he said.
Earlier, traders shrugged off data from the Commerce Department showing a narrowing trade deficit for May and a separate report from the Labor Department that revealed a jump in import prices in June.
The major averages have moved off of their worst levels of the day in recent trading, but they remain stuck in negative territory. The Dow is currently down 61.97 at 8,121.20, the Nasdaq is down 4.38 at 1,748.17 and the S&P 500 is down 6.07 at 876.61.
Housing stocks are retreating by substantial margins, as reflected by the 2.2 percent retreat being shown by the Philadelphia Housing Sector Index. With the decline, the index is testing its worst intraday level in over three months, set on Wednesday.
Commercial real estate stocks are also turning in disappointing performances, with a 1.7 percent loss being posted by the Morgan Stanley Real Estate Index. The day's fall has dragged the index down for a fourth straight session to a more than two-month intraday low.
Brandywine Realty Trust (BDN), Parkway Properties (PKY), and Developers Diversified Realty (DDR) are turning in some of the sector's worst performances.
Resource stocks also continue to post notable losses, with oil and steel stocks leading the way lower. The NYSE Arca Oil Index is down by 2 percent and the NYSE Arca Steel Index has fallen by 1.8 percent.
The losses by oil stocks come as the price of crude oil continues to plummet, sliding by $1.39 to $59.02 per barrel on the NYMEX.
A broad variety of other sectors are also seeing losses, with considerable weakness visible among banking, telecommunications, and healthcare related stocks.
Meanwhile, some transportation and electronic storage stocks are bucking the day's broad downtrend, with the Dow Jones transportation Average and the NYSE Arca Disk Drive Index posting modest gains.
Stock In The News
Shaw Group (SGR) is sliding in early afternoon trading after the company stated that its third quarter profit plunged to $7.9 million or $0.09 per share from $52.0 million or $0.62 per share reported in the same period last year. The company also lowered its earnings forecast for fiscal 2009. The stock has plunged by 10.1 percent, falling to its worst intraday price in four months.
Shares of Susquehanna Bancshares (SUSQ) are also falling after the company revealed that it expects second quarter earnings to come in below market expectations, mainly as a result of an expected increase in the provision for loan losses. Shares of the financial firm are down by 9.5 percent, falling to a multi-year low.
Meanwhile, Kennametal (KMT) is on the rise after pricing an offering of 7 million shares of common stock at Thursday's market close of $15.75 per share. The stock is up by 9.3 percent, bouncing off of the three-month closing low set in the previous session.
In Focus: Economic Data, Earnings, The New GM
As mentioned above, the Reuters/University of Michigan report showed that the preliminary reading on the consumer sentiment index for July came in at 64.6 compared the final reading of 70.8 for June. Economists had been expecting a more modest decrease to a reading of about 70.0.
Earlier, the Commerce Department revealed that the U.S. trade deficit narrowed to $26.0 billion in May from $29.2 billion in April. The data surprised economists, who had expected the deficit to widen to $30.0 billion for the month.
A separate report from the Labor Department revealed that import prices rose 3.2 percent in June while export prices rose 1.1 percent. The jump in import prices was largely due to a substantial increase in the prices of petroleum imports.
On the corporate front, Dow component Chevron (CVX) released its interim earnings update after the markets closed on Thursday, revealing a sharp drop in its U.S. refining margins for the second quarter. The firm also said that it expects its downstream results for the quarter to be significantly lower than in the previous quarter.
Meanwhile, General Motors Corp. (GMGMQ.PK) CEO Fritz Henderson announced in a press conference this morning that the new General Motors Company is beginning its operations as a new entity.
The new GM is majority-owned by the U.S. government, which holds a 61 percent stake in the company. The remaining shares will be held by a United Auto Workers union healthcare trust, the governments of Canada and Ontario, and GM's former unsecured bondholders.
In overseas trading, stock markets across the Asia-Pacific region ended Friday's session mostly lower. Japan's benchmark Nikkei 225 Index closed down by less than a tenth of a percent, while Hong Kong's Hang Seng Index slipped by 0.5 percent on the day.
The major European markets also finished on the downside, with the German DAX Index and the French CAC 40 Index closing down by 1.2 percent and 1.4 percent, respectively. The U.K.'s FTSE 100 Index also fell, posting a loss of 0.8 percent for the session.
In the bond markets, treasuries are extending their gains amid renewed economic concerns. Subsequently, the benchmark ten-year note is trading at 3.297 percent, a loss of 11.6 basis points on the day.
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