Benchmarks added paltry gains after English and French central
banks suggested dire future prospects and domestic companies' said
European concerns were responsible for their dismal results.
Meanwhile, German industrial production suffered a contraction.
Nonetheless, the Dow and S&P 500 stretched their gains into a
fourth-consecutive day, while the Nasdaq slipped into the red.
The Dow Jones Industrial Average (DJI) edged up by a mere 0.1%
and closed at 13,175.64. The Standard & Poor 500's (S&P
500) gain of 0.87 points or 0.1% left the benchmarks hardly changed
at 1,402.22. The tech-laden Nasdaq Composite Index failed to finish
in the green and dropped 0.2% to end at 3,011.25. The fear-gauge
CBOE Volatility Index (VIX) was down 4.2% and settled at 15.32.
Volumes remained light yet again as consolidated volumes on the New
York Stock Exchange, American Stock Exchange and Nasdaq were
roughly 5.72 billion shares, sharply lower than last year's daily
average of 7.84 billion. Advancing stocks edged past the decliners
on the NYSE; as for 49% stocks that gained, 47% stocks closed
Markets opened in the red yesterday after investors received
dismal headlines from Europe. While the Bank of England slashed
Britain's economic growth outlook, Bank of France warned of a
recession befalling the nation in the third quarter. Coming to the
details of the report, the Bank of England stated that Euro-zone
debt worries are taking a severe toll and the central bank slashed
their 2012 GDP growth estimates to "around zero" from estimates of
a growth of 0.8%.
Governor Mervyn King said that "storm clouds continue to roll in
from the euro area" and that they have affected growth prospects.
With 22 gold medals in the kitty so far, Britain recorded its best
Olympic display yesterday. However, King stated: "Unlike the
Olympians who have thrilled us over the past fortnight, our economy
has not yet reached full fitness. But it is slowly healing".
King warned that there may be negative news coming in, saying:
"The overall outlook for growth is weaker than in May, reflecting
downside news in the near term and, in the medium term, the
possibility that the weakness in output and productivity growth
that we have seen since the financial crisis persists." Thus, with
a reduction in the GDP estimate and expectations of almost zero
growth, a rise in investors' apprehensions was but natural.
Additionally, Bank of France warned that the French economy
might be heading for a recession in the third quarter. The
country's GDP is estimated to shrink 0.1% in the third quarter from
the second quarter. This first estimate for the third quarter of
2012 comes after previous projections of similar contraction in the
second quarter. Thus, recession, which is generally defined as two
consecutive quarters of contraction, may soon grip the French
Separately, German's industrial production dropped in June,
suggesting the ill-effects of European debt woes. The Economy
Ministry said industrial production declined to 0.9% in June from
prior month. In May, industrial production had gained 1.7%.
Further, the Federal Statistical Office noted that the country's
exports slumped to 1.5% in June from May. In contrast, exports had
jumped 4.2% in May.
With many negatives coming out of the European continent,
domestic companies also blamed the region for their dismal results.
Shares of Priceline.com Inc (NASDAQ:
) slumped 17.3% after revenues fell short of Street estimates.
Further, the company also provided a dismal outlook. Investors were
far from impressed with revenue growth, which was affected by
lingering debt troubles in Europe. Another retailer, Ralph Lauren
) said the dismal economic situation might reduce spending on
clothes. The company anticipates a low-single-digit decline in
wholesale sales. Subsequently, shares of Ralph Lauren dropped
Separately, July sales came in flat for the world's largest
burger chain, McDonald's Corp.'s (NYSE:
); its worst performance of the company in nine years. The drop
this time hinted that soft economic conditions were a major
headwind and that is eventually affecting spending. Shares of MCD
were down 1.7% yesterday. Meanwhile, Alpha Natural Resources, Inc.
) had to reduce 2012 metallurgical coal sales guidance owing to a
slump in Europe's steel output. The company's shares plunged
ALPHA NATRL RES (ANR): Free Stock Analysis
MCDONALDS CORP (MCD): Free Stock Analysis
PRICELINE.COM (PCLN): Free Stock Analysis
RALPH LAUREN CP (RL): Free Stock Analysis
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