Stocks have come off lows for the session but are still firmly
in red as investor concern focuses on Europe's ongoing debt crisis
and threats of a global economic slowdown, after first-time jobless
claims rose domestically. The Dow Jones Industrial Average plunged
more than 500 points on lackluster economic data also coming out of
Morgan Stanley raised red flags this morning, saying the global
economy is "dangerously close to a recession" and pointing a finger
at governments in Europe for failing to contain the sovereign debt
The bank cut its global gross domestic product growth forecast
to 3.9% from 4.2% for 2011, and to 3.8% from 4.5% for 2012. "Our
revised forecasts show the US and the euro area hovering
dangerously close to a recession -- defined as two consecutive
quarters of contraction -- over the next 6-12 months," Morgan
Stanley's global economics team warned in a research note.
Today's slump comes after the failure of German Chancellor
Angela Merkel and French President Nicolas Sarkozy to come up with
concrete proposals to address the region's debt problems during a
meeting earlier this week. Investors appear to have revived a
rotation out of cyclical stocks in favor of safe-haven markets such
as gold and U.S. Treasuries. The 10-Year T-bill fell below 2% to
The number of initial jobless benefit claims in the week ending
Aug. 13 rose 9,000 to 408,000. The increase was larger than
expected. The less-volatile four-week average fell 3,500 to
Also reported, the consumer price index increased 0.5%, the
largest monthly gain since March and slightly hotter than
economists expected. The core CPI, which excludes food and energy
costs, was up 0.2% in July, in line with expectations.
In company news:
Bank of America (
) shares have pared much of the gains over the last several
session, thanks to new report that the bank may face up to $9
billion more in liabilities for faulty mortgages if a judge agrees
with MBIA (
) that it must buy back loans even if the errors didn't cause a
default, Bloomberg reported.
Shares of Merck & Co. (
) are down while Bloomberg reports that the U.S. Food and Drug
Administration approved a generic version of the drug maker's
Proscar and Propecia medication from Sun Pharmaceuticals - the
largest drug maker in India by market value. The drugs treat hair
loss and enlarged prostates in men.
Shares of Apple (
) are down while The Wall Street Journal reports the computer
maker's Chief Financial Officer Peter Oppenheimer noted during a
conference call with investors that companies should invent their
own technology instead of buying it from outside the company. The
comment came after a participant asked him about Google's (
) recent buy of Motorola Mobility (MMI) for $12.5 billion.
Oppenheimer said that "$12.5 billion is a lot of money," Apple blog
One bright spot, DARA BioSciences (DARA) are up, despite the
bloodletting in the rest of the market after it said this morning
that its investigational drug KRN5500 has been granted Fast Track
designation by the FDA to treat chemotherapy-induced neuropathic
pain in patients with cancer.
ADRs of HSBC Holdings (HBC) are down sharply while the Wall
Street Journal says U.S. regulators will increase their scrutiny of
Europe's largest lenders on concern that Europe's debt crisis may
lead to a funding squeeze.
Shares of MGM Resorts (MGM) are slumping sharply as the Wall
Street Journal that its original owner, Kirk Kerkorian, has sold 20
million of his shares in the company, cutting his stake to 22% from
27%. MGM shares are down 10.8%, or $1.25, to $10.29.
In a late-breaking development, Hewlett-Packard (HPQ) rocketed
out of the red to a high of $34, up 6%, but is rapidly giving back
gains, up 1.43%, after Bloomberg reported that the company is
contemplating spinning off its computer business and eyeing a
possible acquisition in the UK.
In earnings news:
--Shares of Tech Data (TECD) are faltering after the technology
products distributor said this morning that its second quarter
sales were $6.45 billion with earnings per share of $1.10. Both
were above the Street view for EPS and revenue of $0.95 and $6.13
billion, respectively. For Q3, the company said it expects
year-over-year, mid-single-digit organic sales growth in both
regions in local currencies.
Commodities are mixed. December gold contracts are up 1.51% to
$1,821 an ounce while September crude oil contacts are down 5.04%
to $83.20 a barrel.
In energy ETFs, the United States Oil Fund (USO) is down 4.79%
to $32.38 and the United States Natural Gas fund (UNG) is down
1.21%, to $9.82.
In precious metal ETFs, the SPDR Gold Trust (GLD) is up 1.43% to
$176.91. Market Vectors Gold Miners (GDX) is down 0.43% to $60.48.
iShares Silver Trust (SLV) is up 0.38% to $39.48.