Railroads Raise Red Flags for U.S. Economy

Mukesh Buch
23 Oct, 2009
New York City

U.S. market indexes closed lower as the economic sensitive railroads estimated weaker outlook for the rest of the year. Transportation sector weakness dragged the broader market lower but tech stocks advanced after earnings from Microsoft and Amazon.com.

[R]4:30 PM New York, 9:30 PM London, 6:30 AM Sydney – U.S. market indexes closed lower as the economic sensitive railroads estimated weaker outlook for the rest of the year. Transportation sector weakness dragged the broader market lower but tech stocks advanced after earnings from Microsoft and Amazon.com.[/R]

New York stocks declined as investor stayed on the sidelines as earnings parade continues. Microsoft, Amazon.com and Whirlpool surged on earnings. Most companies are still reporting declining earnings and sales. Energy complex stocks traded lower on weak crude oil prices.

Amazon.com surged 27% after it reported 69% jump in quarterly results. Microsoft gained 10% on higher than expected earnings as it accelerates cost cutting. Home builders trade lower. Oil complex stocks fell as the oil prices edge lower.

Burlington Northern Santa Fe dropped 6.5% after it estimated weaker than expected earnings in the fourth quarter, adding to the flat outlook projected by Union Pacific Corp.

Broadcom Corp declined 7.3% after it estimated flat sales in the current quarter.

UK third quarter GDP fell at 0.4%. The six quarterly declines in a row is the longest streak since the record keeping began in 1955. The latest economic data surprised most economists and the prospect of the economic recovery remain slim.

German business confidence index increased to a 13-month high and UK third quarter gross domestic product shrank 0.4%. Weak oil dragged Total SA, Eni SpA and Repsol. Volvo AB gained 5% after it reported a lower than expected loss. Euro hovered near its highs against the dollar and the pound.

North American Markets

Dow Jones Industrial Average decreased 109.13 or 1.1% to a close of 9,972.18, S&P 500 Index decreased 13.31 or 1.2% to 1,079.60, and Nasdaq Composite Index decreased 10.82 or 0.5% to close at 2,154.47. Toronto TSX Composite Index fell 151.24 to 11,382.13.

Of the stocks in S&P 500 index, 45 increased, 452 declined and 3 were unchanged.

Memc Electric Materials led the decliners in the S&P 500 index with a loss of 10.1% followed by losses in CA Inc if 9.6%, in Broadcom Corporation of 9.6%, in Biogen Idec Inc of 7.3% and in Office Depot Inc of 6.9%.

Amazon.com, Inc led gainers in the S&P 500 index with a rise of 26.8% followed by gains in Compuware Corporation 12.0%, in T. Rowe Price 10.5%, in Legg Platt
Capital One Financial Corporation of 9.8% and in Microsoft Corporation of 8.9%.

South American Markets Indexes

Mexico Bolsa Index decreased 144.08 or 0.5% to 30,617.68 and Brazil Bovespa Stock Index decreased 1,076.13 or 1.6% to 65,058.84.

Argentina Merval Index decreased 0.6% and Chile Stock Market Select index increased 0.2% and Colombia IGBC General Index increased 0.03% and Peru Lima General Index decreased 0.3%.

Europe Markets Review

In London FTSE 100 Index closed higher 35.21 or 0.68% to 5,242.57, in Paris CAC 40 Index decreased 12.61 or 0.33% to close at 3,808.24, in Frankfurt DAX index lower 22.68 or 0.39% to close at 5,740.25. In Zurich trading SMI decreased 27.85 or 0.43% to close at 6,378.06.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 15.82 or 0.64% to 10,282.99, Hang Seng index in Hong Kong increased 379.21 or 1.71% to 22,589.73, and CSI 300 index in China higher 65.93 or 1.97% to 3,413.25. ASX 200 index in Australia increased 46.60 or 0.97% to 4,859.40. The FTSE Bursa KL Composite index in Malaysia was higher 7.08 or 0.56% to 1,267.10.

The Kospi Index in South Korea increased 9.84 or 0.60% to close at 1,640.33, JSE Index in Indonesia increased 34.76 or 1.43% to 2,467.95. The Sensex index in India increased 21.07 or 0.13% to 16,810.81. Markets in Thailand were closed today.

Commodities, Metals, and Currencies

Crude oil decreased $1.49 to $79.70 a barrel for a front month contract, natural gas edged down 15 cents to $4.79 per mBtu and gasoline decreased 1.32 cents to 203.10 cents.

Soybean future closed up 0.50 cents to $10.07 a bushel. Wheat futures closed down 4.00 cents in Chicago trading to $5.47 a bushel. Sugar closed up 0.04 cent 23.12 cents.

Gold decreased $3.60 in New York trading to close at $1,055.00 per ounce, silver closed up $0.15 to $17.69 per ounce and copper for the front month delivery increased 2.30 cent to $3.023 per pound.

Dollar edged down against euro to $1.5012 and closed up against the Japanese yen to 92.08.

Yield on 10-year U.S. bonds increased to 3.49% and with 30-year maturities advanced to 4.29%.