Stocks slump on recession fearsWeak Philly Fed index revives investors' worries about the slowing economy.NEW YORK (CNNMoney.com) -- Stocks slumped Thursday after a weak manufacturing report exacerbated worries that the economy is heading for a recession, if its not already in one. According to early tallies, the Dow Jones industrial average (INDU) fell 1.2%, while the broader Standard & Poor's 500 (SPX) index lost 1.3%. The Nasdaq composite (COMP) fell 1.2%. The Philadelphia Fed index, a regional reading on manufacturing, tumbled to -24.0 from -20.9 in January, surprising economists who were looking for manufacturing to improve a bit in the month. Negative readings suggest contraction in the sector. The report followed a similarly bleak reading on manufacturing in the New York area that was released recently, adding to bets about a broader slowdown in that sector. The stock reaction to the report reflects a realization that economic numbers, more and more, are beginning to reflect the risk of a recession, said Kenny Landgraf, principal and founder at Kenjol Capital Management. He said that in general, this realization is being countered by signs that there are relative bargains to be found in areas of the market that have been beaten down recently. "One side of the issue is the impact of the recession and how deep it may run," Landgraf said. "On the other side, there are a lot of stocks that have been sold off hard, which creates decent values." This tug is adding to the day-to-day volatility, he said. The Philly Fed report knocked out early stock gains led by the tech sector, which was bouncing off a Cisco upgrade and upbeat profit forecast from BlackBerry-maker Research in Motion. Economic news. The January index of leading economic indicators fell 0.1%, as expected. It fell for the fourth month in a row. The index had previously fallen a revised 0.1% in December and 0.4% in November. Weekly jobless claims declined last week, the Labor Department reported. But the four-week moving average, seen as a more accurate indicator of the labor market, rose to levels not seen since October 2005 in the aftermath of Hurricane Katrina. Corporate news. Blue chip declines were broad, with 26 out of 30 Dow components sliding, led by General Motors (GM, Fortune 500), DuPont (DD, Fortune 500), Merck (MRK, Fortune 500) and JP Morgan (JPM, Fortune 500). Dow component Exxon Mobil (XOM, Fortune 500) was one of many oil stocks falling in reaction to the drop in commodity prices, as well as a downgrade of BP (BP) by Citigroup. Cisco (CSCO, Fortune 500) gained after Citigroup upgraded it to "buy" from "hold," saying that it offers good value for long-term investors. The stock had been higher in the morning. BlackBerry-maker Research in Motion (RIMM) advanced 9% after the company reaffirmed its fourth-quarter profit guidance and lifted its net subscription outlook. Microsoft (MSFT, Fortune 500) was little changed after the company said it will share more info about its products and technology, so that developers can more easily create compatible software. In merger news, Reed Elsevier (RUK), the owner of the LexisNexis service, said it is buying data services firm ChoicePoint for $4.1 billion in cash. Shares of ChoicePoint (CPS) jumped 43%. Market breadth was negative. On the New York Stock Exchange, decliners topped advancers by nearly 3 to 1 on volume of about 950 million shares. On the Nasdaq, losers beat winners almost two to one on volume of 1.7 billion shares. Other markets. U.S. light crude oil for April delivery fell $1.47 to settle at $98.23 a barrel on the New York Mercantile Exchange, retreating despite a weaker-than-expected weekly oil inventories report. The March crude futures contract settled at an all-time high of $100.74 a barrel Wednesday after touching a trading high of $101.32. COMEX gold for April delivery rose $11.40 to settle at $949.20 an ounce. Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.76% from 3.9% late Wednesday. Bond prices and yields move in opposite directions. In currency trading, the dollar fell versus the euro and the yen. |
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