If stocks truly do climb a wall of worry, then there's plenty for them to climb. The gain from Thursday's better than expected GDP figures vanished the next day. The culprit?
An 0.5 percent drop in consumer spending, flat personal incomes, and an increase in the savings rate. Of particular concern to many was that even though personal incomes were flat, wages and salaries decreased by 0.2 percent.
The drop in consumer spending was right where the consensus estimate came in. Analysts had expected a drop in spending after the expiration of the cash for clunkers program, and they were right. Not surprisingly, sales of durable goods to consumers plunged by seven percent in September, after a gain of 6.1 percent in August. Much of the swing was attributed to the cash for clunkers program. Car sales were projected to have declined to less than ten million vehicles on an annual basis after getting a boost to 11.5 million vehicles in August.
Analysts said that the drop in consumer spending is a concern heading into the holiday season, which accounts for the majority of profits for most retailers. With personal incomes flat and consumer spending declining, analysts are concerned that retailers may not meet their holiday estimates.
Even though the drop in consumer spending was expected, when added to worse than expected numbers on consumer confidence and housing, it was able to drag the markets down. The Dow lost 2.5 percent to close at 9,713. All 30 Dow components were lower, led by a drop of 7.3 percent in Bank of America and 5.8 percent in J.P. Morgan Chase. The S&P dropped by 2.8 percent to 1,036, with financial, material, and energy companies leading the decline. The Nasdaq was off by 2.5 percent and closed at 2,045.
Both the S&P 500 and Nasdaq were down for the month, with the Dow essentially flat. The drop in the S&P 500 ended a seven month streak of gains.
All in all, it was a very disappointing week for investors. Some, of course, were more disappointed than others. Regular readers may recall that a position was entered in Novatel Wireless and ABB. How did those trades turn out? Not so well. Novatel dropped by 20 percent after reporting strong third quarter earnings but providing disappointing guidance for the fourth quarter. And ABB, while reporting a 12 percent gain in earnings, dropped on comments by its executives that the outlook for this year and next "remains uncertain."
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=4dd36d09-f2d6-411b-8c00-56ab0b7ce502)
An 0.5 percent drop in consumer spending, flat personal incomes, and an increase in the savings rate. Of particular concern to many was that even though personal incomes were flat, wages and salaries decreased by 0.2 percent.
The drop in consumer spending was right where the consensus estimate came in. Analysts had expected a drop in spending after the expiration of the cash for clunkers program, and they were right. Not surprisingly, sales of durable goods to consumers plunged by seven percent in September, after a gain of 6.1 percent in August. Much of the swing was attributed to the cash for clunkers program. Car sales were projected to have declined to less than ten million vehicles on an annual basis after getting a boost to 11.5 million vehicles in August.
Analysts said that the drop in consumer spending is a concern heading into the holiday season, which accounts for the majority of profits for most retailers. With personal incomes flat and consumer spending declining, analysts are concerned that retailers may not meet their holiday estimates.
Even though the drop in consumer spending was expected, when added to worse than expected numbers on consumer confidence and housing, it was able to drag the markets down. The Dow lost 2.5 percent to close at 9,713. All 30 Dow components were lower, led by a drop of 7.3 percent in Bank of America and 5.8 percent in J.P. Morgan Chase. The S&P dropped by 2.8 percent to 1,036, with financial, material, and energy companies leading the decline. The Nasdaq was off by 2.5 percent and closed at 2,045.
Both the S&P 500 and Nasdaq were down for the month, with the Dow essentially flat. The drop in the S&P 500 ended a seven month streak of gains.
All in all, it was a very disappointing week for investors. Some, of course, were more disappointed than others. Regular readers may recall that a position was entered in Novatel Wireless and ABB. How did those trades turn out? Not so well. Novatel dropped by 20 percent after reporting strong third quarter earnings but providing disappointing guidance for the fourth quarter. And ABB, while reporting a 12 percent gain in earnings, dropped on comments by its executives that the outlook for this year and next "remains uncertain."
Leave a comment