Wall St start to new year worst in 25 years
By Chris Bryant in New York
Published: January 2 2008 13:58 | Last updated: January 2 2008 22:14
US blue-chip stocks on Wednesday suffered the worst start to a new year in 25 years after an index of manufacturing fell sharply, raising fears that the US economy is slowing more than expected.
Energy stocks were a lone bright spot as crude oil prices touched $100 a barrel, but the spike in crude accentuated selling of a broad range of transport and industrial companies. Technology stocks were particularly weak after an analyst downgraded several semiconductor companies.
EDITORS CHOICE
Recession fears in US weigh on FTSE - Jan-02Asian shares start 2008 on a gloomy note - Jan-02Exporters lead slide in Europe - Jan-02Markets in review in 2007 - Jan-01Dollar stumbles into 2008 - Jan-01The Dow Jones Industrial Average fell 1.7 per cent to 13,043.96 points, its worst percentage decline on the first trading day of a year since 1983. The S&P 500 closed 1.4 per cent lower at 1,447.16 and the Nasdaq Composite shed 1.6 per cent to 2,609.63.
The Institute for Supply Managements survey showed that manufacturing weakened unexpectedly in December. The ISM index fell 3.1 percentage points to 47.7 last month, against expectations it would be little changed. A reading of 50 marks the line between growth and contraction.
Clearly the worries that we finished 2007 with are continuing into 2008, with these ISM numbers coming out so weak, Ryan Larson, senior equity trader at Voyageur Asset Management, said. The Fed is caught between a rock and a hard place trying to fight inflation while dealing with the slowdown in US growth.
Minutes from the Federal Open Market Committees December meeting emphasised the difficulty of unusually uncertain economic conditions and indicated the Fed remained exceptionally alert to the possible need for further rate cuts.
The futures market fully priced in the likelihood of at least a 25 basis point cut at the end of this month compared with a 68 per cent chance a week ago.
Semiconductor stocks were sold after Banc of America Securities downgraded eight companies three of them to sell saying a cyclical recovery had run its course, while inventories had risen above equilibrium levels.
BofA analyst Sumit Dhanda cut Intel to neutral and told investors to sell shares in Advanced Micro Devices. The shares fell 4.9 per cent to $25.35 and 4.8 per cent to $7.14 respectively. The PHLX semiconductor sector index lost 2.9 per cent to 396.34.
Also in the chip sector Qualcomm fell 2.4 per cent to $38.39 after it said it expected an immediate short-term impact from a court ruling that it must halt chip sales that infringe patents belonging to Broadcom. Broadcom gained 1.5 per cent to $26.52.
Amazon outperformed after Citigroup told investors to buy the shares citing expectations of strong revenue growth and margin expansion. The shares gained 3.9 per cent to $96.25.
Transport groups struggled as oil prices soared and after JPMorgan downgraded FedEx from overweight to neutral because of weak freight demand and higher fuel costs. The shares fell 3.9 per cent to $86.16.
YRC Worldwide, the trucking company, fell 9.7 per cent to $15.43 after warning it expected to incur charges in the fourth quarter related to previous acquisitions. Goodyear Tire & Rubber fell 5 per cent to $26.82 after Goldman Sachs said that cost inflation was acting as a large offset to cost savings activity.
Investors also sold restaurant chains after Bear Stearns downgraded the sector to underweight. Analyst Joseph Buckley cut Starbucks to peer perform from outperform because he expects less affluent consumers will start to feel economic pressures. The stock fell 5.7 per cent to $19.31.
Shares in Industrial companies declined after the ISM report and as Citi downgraded Textron, the industrial conglomerate, to hold from buy. The shares fell 6.3 per cent to $66.81.
Financials fell heavily as National City said it would slash its dividend by almost 50 per cent and that it planned to raise more capital to cope with credit market turmoil. The shares dropped 5.3 per cent to $15.59. The S&P investment bank index shed 3.5 per cent with Morgan Stanley, down 4.1 per cent at $50.95 and Lehman Brothers, 5 per cent weaker at $62.19.
Newmont Mining, the worlds second largest gold producer, rose 7.3 per cent to $52.39, the best performer on the S&P, as gold prices surged to a record high.
As oil prices rose, energy stocks benefited. Transocean, the worlds largest offshore drilling company gained 2 per cent to $145.95.
Copyright The Financial Times Limited 2008
By Chris Bryant in New York
Published: January 2 2008 13:58 | Last updated: January 2 2008 22:14
US blue-chip stocks on Wednesday suffered the worst start to a new year in 25 years after an index of manufacturing fell sharply, raising fears that the US economy is slowing more than expected.
Energy stocks were a lone bright spot as crude oil prices touched $100 a barrel, but the spike in crude accentuated selling of a broad range of transport and industrial companies. Technology stocks were particularly weak after an analyst downgraded several semiconductor companies.
EDITORS CHOICE
Recession fears in US weigh on FTSE - Jan-02Asian shares start 2008 on a gloomy note - Jan-02Exporters lead slide in Europe - Jan-02Markets in review in 2007 - Jan-01Dollar stumbles into 2008 - Jan-01The Dow Jones Industrial Average fell 1.7 per cent to 13,043.96 points, its worst percentage decline on the first trading day of a year since 1983. The S&P 500 closed 1.4 per cent lower at 1,447.16 and the Nasdaq Composite shed 1.6 per cent to 2,609.63.
The Institute for Supply Managements survey showed that manufacturing weakened unexpectedly in December. The ISM index fell 3.1 percentage points to 47.7 last month, against expectations it would be little changed. A reading of 50 marks the line between growth and contraction.
Clearly the worries that we finished 2007 with are continuing into 2008, with these ISM numbers coming out so weak, Ryan Larson, senior equity trader at Voyageur Asset Management, said. The Fed is caught between a rock and a hard place trying to fight inflation while dealing with the slowdown in US growth.
Minutes from the Federal Open Market Committees December meeting emphasised the difficulty of unusually uncertain economic conditions and indicated the Fed remained exceptionally alert to the possible need for further rate cuts.
The futures market fully priced in the likelihood of at least a 25 basis point cut at the end of this month compared with a 68 per cent chance a week ago.
Semiconductor stocks were sold after Banc of America Securities downgraded eight companies three of them to sell saying a cyclical recovery had run its course, while inventories had risen above equilibrium levels.
BofA analyst Sumit Dhanda cut Intel to neutral and told investors to sell shares in Advanced Micro Devices. The shares fell 4.9 per cent to $25.35 and 4.8 per cent to $7.14 respectively. The PHLX semiconductor sector index lost 2.9 per cent to 396.34.
Also in the chip sector Qualcomm fell 2.4 per cent to $38.39 after it said it expected an immediate short-term impact from a court ruling that it must halt chip sales that infringe patents belonging to Broadcom. Broadcom gained 1.5 per cent to $26.52.
Amazon outperformed after Citigroup told investors to buy the shares citing expectations of strong revenue growth and margin expansion. The shares gained 3.9 per cent to $96.25.
Transport groups struggled as oil prices soared and after JPMorgan downgraded FedEx from overweight to neutral because of weak freight demand and higher fuel costs. The shares fell 3.9 per cent to $86.16.
YRC Worldwide, the trucking company, fell 9.7 per cent to $15.43 after warning it expected to incur charges in the fourth quarter related to previous acquisitions. Goodyear Tire & Rubber fell 5 per cent to $26.82 after Goldman Sachs said that cost inflation was acting as a large offset to cost savings activity.
Investors also sold restaurant chains after Bear Stearns downgraded the sector to underweight. Analyst Joseph Buckley cut Starbucks to peer perform from outperform because he expects less affluent consumers will start to feel economic pressures. The stock fell 5.7 per cent to $19.31.
Shares in Industrial companies declined after the ISM report and as Citi downgraded Textron, the industrial conglomerate, to hold from buy. The shares fell 6.3 per cent to $66.81.
Financials fell heavily as National City said it would slash its dividend by almost 50 per cent and that it planned to raise more capital to cope with credit market turmoil. The shares dropped 5.3 per cent to $15.59. The S&P investment bank index shed 3.5 per cent with Morgan Stanley, down 4.1 per cent at $50.95 and Lehman Brothers, 5 per cent weaker at $62.19.
Newmont Mining, the worlds second largest gold producer, rose 7.3 per cent to $52.39, the best performer on the S&P, as gold prices surged to a record high.
As oil prices rose, energy stocks benefited. Transocean, the worlds largest offshore drilling company gained 2 per cent to $145.95.
Copyright The Financial Times Limited 2008



