Weak Consumer Spending, Retailers Decline

123jump.com Staff
28 Mar, 2008
New York City

U.S. stocks edged lowere after worries related to consumer spending resurfaced. February personal spending rose at a slower than expected pace and an index of inflation in the month sharply. Rising food and energy prices are contributing to steady rise in inflation. Retailers were on the decline after JC Penney lowered its earnings outlook. In the earnings news, Accenture reported better than expected earnngs and Williams-Sonoma fell on lowered revenue growth outlook in 2008.

[R]10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – U.S. stocks traded lower after personal spending in February rose at anemic level and retailers declined. Tech stock rebound in the morning lost its momentum in the afternoon.[/R]

Global Markets Update

U.S. stocks traded lower after the release of anemic personal consumption in February and a lowered earnings expectations from JC Penney. Personal consumption in the month rose 0.1% from January when it added 0.4%. The Fed’s preferred measure of inflation rose 0.1% in February after increasing 0.3% in January. The seasonally adjusted data from a year ago in February rose 3.4% in February, at a slower pace than a rise in January.

It is widely believed that the government inflation data are lagging and do not capture the total inflation that most families experience. The sharp rise in food and energy costs are still not reflected in the inflation measures.

JC Penney closed 7.5% lower after it lowered its same store sales expectations for the month and for the quarter and slashed its earnings outlook to 50 cents from 75 cents to 80 cents. Accenture jumped after it reported better than expected earnings of 64 cents compared to 47 cents a year ago. Williams-Sonoma, retailer of kitchen goods reported fourth quarter earnings of $1.15 compared to $1.06 a year ago.

European money markets continue to remain tight as banks are unwilling to lend to each other. ECB today, for the first time decided to offer €50 billion in six month loans at two separate auctions beginning next week and also renew €100 billion in loans for three months.

Money markets in Europe on Friday were seized, and rates that bank charge rose, near recent highs today. Libor rate in pound rose to 6% from 5.73% at the end of February and Euribor rate jumped to 4.72%.

European Markets indexes

In London FTSE 100 Index closed lower 24.60 or 0.43% to 5,692.90, in Paris CAC 40 Index decreased 23.61 or 0.50% to close at 4,695.92 and in Frankfurt DAX index closed lower 18.16 or 0.28% at 6,559.90. In Zurich trading SMI decreased 25.61 or 0.35% to close at 7,239.35.

North American Markets indexes

Dow Jones Industrial Average declined 86.06 or 0.70% to a close of 12,216.40, S&P 500 closed down 10.54 or 0.80% to 1,315.22, and Nasdaq Composite Index decreased 19.65 or 0.86% to a close at 2,261.18. In Toronto TSX Composite closed down 171.99 or 1.28% to 13,233.79.

Of the 30 stocks in Dow Jones Industrial Average, 7 closed higher, 22 closed lower, and one was unchanged.

Citigroup led the decliners in the Dow with a loss of 4.4% followed by declines in American Express to 3.75%, in General Motors of 3.06%, in AIG of 1.52%, and in Bank of America of 1.5%. Alcoa led the gainers in the index with a rise of 2.06% followed by increases in 3M and Chevron of 0.12%, in DuPont of 0.09 and in Caterpillar of 0.08%.

Of the stocks in S&P 500 index, 128 stocks increased, 365 declined, and 7 were unchanged. Of the stocks in the index, 67 stocks fell more than 3% and 10 gained more than 3%.

Apollo Group led the decliners in the index with a plunge of 27% followed by losses in National City of 13%, in Liz Claiborne of 9.1%, in JC Penney of 7.5%, in SLM Corp of 7.4%, and in Fannie Mae of 7%. Jones Apparel, Freddie Mac, MGIC and First Horizon lost more than 6%.

Tenet Healthcare led the gainers in the index with a rise of 4%, followed by gains in US Steel of 3.4%, in Yahoo of 3.2% and in ConAgra of 2.7%. L3 Communications Holdings, CIT Group, Murphy Oil, and Alcoa gained more than 2%.

South American Markets Indexes

In Latin Markets Venezuela led the gainers in the region with a rise of 0.74% followed by increases in Mexico of 0.34%, and in Argentina of 0.29%. Brazil led the decliners in the region with a loss of 0.51% followed by losses in Peru of 0.16%.

Jamaican market surged 4.36% after the government released budget expenditure for the fiscal year. The $7 billion budget shows 23% increase in spending compared to a year ago but after adjusting for 18% inflation there is little money left for infrastructure development. More than 50% of the budget is allocated to paying interest on debt and the government may have to seek $300 million from the international credit markets. Jamaica is one of the few countries in the Caribbean region which has a history interest payment on debt, but has accumulated debt at a higher interest than the current rates in the market.

Asian Markets

In Tokyo Nikkei 225 Index closed higher 215.89 or 1.71% to 12,820.47, in Hong Kong Hang Seng index increased 621.73 or 2.74% closed to 23,285.95. Australia ASX 200 index lower 20.50 or 0.38% to close 5,351.10. In Malaysia KL Composite index increased 4.38 or 0.35% closed to 1,258.41.

In South Korea Kospi Index increased 25.59 or 1.53% to close at 1,701.83, in Thailand SET index closed higher 2.21 or 0.27% to 825.17 and Indonesia JSE Index edged increased 26.24 or 1.07% to 2,477.59. Sensex index in India increased 355.73 or 2.22% to 16,371.29.

Commodities, Metals, and Currencies

Crude oil decreased $2.39 to close at $105.19 a barrel for a front month contract, natural gas increased 15 cent to $9.83 per mBtu, and gasoline futures decreased 1.58 cents to close at 269.95 cents per gallon.

Gold decreased $17.50 in New York trading to close at $936.50 per ounce, silver closed down $0.61 cents to $17.94 per ounce, and copper for front month delivery decreased 4.15 cents to 383.15 per pound.

Wheat futures decreased 25.00 cents in Chicago trading and closed at $9.89 per bushel. Sugar decreased 40.00 cent to 11.73 cents per pound. Soybean future closed down 60.00 cents to $12.67 a bushel.

Dollar edged lower and traded near a record low against euro to $1.5798 and edged lower against yen to 99.29.

Bond Yields increased for 10-year U.S. bonds and closed at 3.44% and on 30-year bonds increased to close at 4.32%.