Economic Sluggishness Shows Its Face, Stocks Weaker
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Stocks are under pressure again today as new economic data showed more cracks in the real economy, suggesting the freezing up of the credit markets is taking its toll on businesses and consumers. At 11:45PM ET the Dow was down 173, the Nasdaq was down 13 and the S&P 500 was down 18. All the major indices were off their worst levels.
Industrial Production in the U.S. sank 2.8% in September, which was the worst drop in 34 years and much slower than expected. The U.S. cited hurricanes and the Boeing aircraft strike. The Philly Fed Index plunged 37.5 in October, the largest decline in almost two decades. In addition, the U.S. added another 461,000 in initial jobless claims last week. On a positive note, CPI, a key inflation gauge, came in flat at 0.0%. Low inflation will give the Federal Reserve more flexibility to lower rates and provide other liquidity measures.
A number of well-heeled hedge funds also announced chilling news. Citadel is reportedly down 26%-30% this year and Highland Capital had to close down its flagship fund after massive losses. Some blame indiscriminate hedge fund selling as a major reason for the massive slide in stocks.
Treasury Secretary Henry Paulson warned that the U.S. economy is going to have a number of tough months ahead despite unprecedented action by the government to prop up the banking system to stimulate lending.
Crude plunged below $70 per barrel today as rising inventories suggests demand is drying up.
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