Stocks Pare Early Declines But Remain Firmly Lower; Crude Oil Plunges

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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 Great Britain.

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 crisis.

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 historic lows.

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 402,500.

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 ( BAC ) 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 ( MBI ) that it must buy back loans even if the errors didn't cause a default, Bloomberg reported.

Shares of Merck & Co. ( MRK ) 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 ( AAPL ) 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 ( GOOG ) recent buy of Motorola Mobility (MMI) for $12.5 billion. Oppenheimer said that "$12.5 billion is a lot of money," Apple blog AppleInsider reported.

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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright (C) 2016 All rights reserved. Unauthorized reproduction is strictly prohibited.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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