Stock Markets drop world wide


Livin' life in Technicolor
Oct 11, 2005
Stocks bounce back after big selloff

By TIM PARADIS, AP Business Writer

NEW YORK - Wall Street rebounded fitfully Wednesday from the previous session's 416-point plunge in the Dow industrials as investors took comfort from comments by Federal Reserve Chairman Ben Bernanke but still showed signs of unease about the economy. In late afternoon trading, the Dow Jones industrials were up 55.76, or 0.46 percent, at 12,272.00.

Broader stock indicators were also higher. The Standard & Poor's 500 index was up 7.82, or 0.56 percent, at 1,406.86, and the Nasdaq composite index was up 9.57, or 0.40 percent, at 2,417.43.

Bernanke's remarks to Congress that he still expects moderate economic growth gave some investors confidence to look for bargains. A recovery in some overseas markets following a worldwide selloff Tuesday also lent some support to U.S stocks, but the advance lacked some conviction — the major indexes fluctuated through the morning and into the afternoon, with the Dow rising as much as 137 points before pulling back and then advancing again.

The Fed chairman allayed some of the fears about a slowdown in the U.S. and Chinese economies that fed Tuesday's drop; remarks earlier in the week from former Fed Chairman Alan Greenspan warning that a U.S. recession could take hold later this year contributed to Tuesday's declines.

Investors were parsing a series of economic reports out Wednesday, hoping to glean a direction for stocks.

The market took some solace from a Commerce Department report that the U.S. economy grew at an annual rate of 2.2 percent in the fourth quarter. The gross domestic product reading was slightly below expectations, but didn't come in as low as some investors feared. The reading was more than a percentage point below the initial estimate of 3.5 percent made a month ago.

Bernanke's comments and the GDP report helped depressed stock prices look a little more attractive.

"It's typical that you get a bounceback the next day," said Joseph V.
Battipaglia, chief investment officer at Ryan Beck & Co. "Now we're essentially flat on the year. Can we go up from here or down? That sorting-out process will continue now."

A recovery in China's Shanghai Composite Index, which had fallen nearly 9 percent Tuesday, also helped boost U.S. stocks, although other Asian markets and European exchanges saw declines of more than 1 percent.

Bonds fell as stocks tried to recoup some losses. The yield on the benchmark 10-year Treasury note rose to 4.56 percent from its low for the year of 4.47 percent late Tuesday.

The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude rose 33 cents to $61.79 on the New York Mercantile Exchange as investors brushed off concerns about demand.

In other economic news, the National Association of Purchasing Management-
Chicago index of business conditions in the Midwest showed a weaker-than-expected reading. The February figure fell to 47.9 from 48.8 in January. The report is often viewed as a bellwether for the Institute for Supply Management's index of manufacturing activity for February, which is due Thursday.

Also, a Commerce Department report found new-home sales fell by 16.6 percent in January from the previous month, the largest drop in 13 years.

"I thought on Monday and I think even more today that the stock market offers good value and that it will move higher for the year," said Ed Keon, chief investment strategist at Prudential Equity Group.

Valuations were lowered by Tuesday's drop, which erased $632 billion in shareholder equity, according to Standard & Poor's.

In corporate news, Merck & Co. regained some ground after the drugmaker issued a first-quarter profit forecast that surpassed estimates of Wall Street analysts and raised its profit target for the year. The company rose $1.05, or 2.4 percent, to $44.23.

Fremont General Corp. fell $2.06, or 17.6 percent, to $9.60 after the mortgage lender warned it would delay the release of its fourth-quarter report, which had been set for Wednesday. The company also plans to delay filing its annual report.

Most U.S.-listed Chinese companies recovered at least some of their huge losses from Tuesday. Internet company Inc. rose 85 cents to $105.61, while Shanda Interactive Entertainment Ltd., which develops online games, rose 95 cents, or 4.2 percent, to $23.57. China Mobile Ltd. advanced $2.21, or 5 percent, to $46.37.

Sprint Nextel Corp. rose $1.05, or 5.7 percent, to $19.50 after the nation's third largest wireless carrier said fourth-quarter profit rose 33 percent on stronger revenue.

While many sectors saw buyers sniffing for deals, homebuilders saw additional selling, due in large part to the Commerce Department report that new-home sales plunged in January by the largest amount in 13 years.

Toll Brothers Inc. fell 73 cents, or 2.4 percent, to $29.86; D.R. Horton Inc. dropped 46 cents to $25.25; Centex Corp. fell 89 cents $49.34; KB Home fell 60 cents to $49.49; and Pulte Homes Inc. fell 48 cents to $29.45.

Advancing issues outpaced decliners by about 2 to 1 on the New York Stock Exchange, where volume was a heavy 1.71 billion shares.
The Russell 2000 index of smaller companies was up 2.08, or 0.26 percent, at 794.74.
Overseas, Japan's Nikkei stock average fell 2.85 percent, while Hong Kong's Heng Seng index ended down 2.46 percent. The benchmark Shanghai Composite Index rose 3.94 percent. Britain's FTSE 100 closed down 1.82 percent, Germany's DAX index finished down 1.53 percent, and France's CAC-40 was down 1.29 percent.


Livin' life in Technicolor
Oct 11, 2005
Fed chairman says markets working well


WASHINGTON - Federal Reserve Chairman Ben Bernanke told Congress on Wednesday that the administration and federal regulators are closely monitoring financial markets in the wake of the biggest sell-off in stock prices in more than five years but so far the markets appear to be "working well."

Facing his first market crisis since taking the top Fed job a year ago, Bernanke answered questions on Tuesday's market plunge with a calm, matter-of-fact demeanor, explaining developments in plain language without any of the famously opague language that his predecessor, Alan Greenspan, sometimes used.

In what might have been a reference to Greenspan, Bernanke testified at one point that there did not appear to be a "single trigger" to Tuesday's sharp sell-off, which saw the Dow Jones industrial average fall by 416.02 points.

Some analysts believe that Greenspan's comments over the weekend that there was a possibility of a recession by the end of the year along with a sharp drop in China's Shanghai stock market contributed to Tuesday's big drop on Wall Street, which saw the Dow Jones industrial average fall by 416.02 points.

But Bernanke let members of the House Budget Committee know that he didn't intend to assign blame.

"There didn't seem to be any single trigger of the market correction we saw yesterday," he said in response to a question. "I don't think it would be useful for me to try to parse the movement into the components associated with different pieces of news or pieces of information."

On Wall Street, investors seemed to take comfort from Bernanke's comments that there was no single trigger to the big selloff. At midday, the Dow Jones average was up 42 points after having been up by more than 100 points earlier in the session.

Despite Tuesday's market turmoil, Bernanke said he did not believe there had been a major change in the outlook for the economy. He repeated that the Fed expects "moderate growth" this year.

Bernanke said that the Fed along with the president's working group, which was formed in the wake of the 1987 stock market crash, had been closely monitoring market developments. He said that the markets "seem to be working well."

He said there had been "no material change in our expectations for the U.S. economy since I last reported to Congress" when he delivered the Fed's latest economic outlook two weeks ago.

"We are looking for moderate growth in the U.S. economy going forward," Bernanke said. He said that if current corrections under way in housing and the amount of inventories being held by business stabilize in coming months, the economy should begin to rebound from its current slowdown by the end of the year.

Bernanke's comments on the stock market decline occurred at a hearing where he delivered virtually identical warnings as he did in a Senate hearing last month about the need to deal with looming budget problems in the government's giant benefit programs of Social Security , Medicare and Medicaid.

At the White House Wednesday, press secretary Tony Snow said that President Bush had called Treasury Secretary Henry Paulson to get a readout on the stock market plunge. Asked what advice the president would give to investors, Snow said: "The president does not give advice to investors in the stock market."

Greenspan, speaking by satellite to an audience in Hong Kong on Sunday night, had said that the current five-year-old economic expansion was beginning to show early signs of the types of imbalances that could lead to a recession. He said it was possible the U.S. could be in a recession by the end of this year, although he noted that most private forecasters did not consider that a likely outcome.

Greenspan's comments and the steep drop in the Shanghai market raised worries that investors needed to focus more on the risks facing the global economy


Livin' life in Technicolor
Oct 11, 2005
Europe, Asia stocks drop, China recovers

By TOBY ANDERSON, AP Business Writer

LONDON - Chinese stocks bounced back Wednesday after their biggest decline in a decade, while shares in Europe and elsewhere in Asia fell for a second day amid jitters about possible slowdowns in the Chinese and U.S. economies. U.S. stocks stabilized on soothing comments from Federal Reserve Chairman Ben Bernanke

Analysts said the selloff was most likely a correction to cool overheating markets.

"There is definitely a case for a market correction but as of yet I would not worry about the economic impact," said Holger Schmieding, chief European economist at Bank of America in London. "This is not something to worry about. There are little ramifications beyond the markets being immediately affected."

In Britain, the benchmark FTSE 100 Index lost 1.82 percent, while France's CAC 40 fell 1.29 percent and Germany's DAX Index slid 1.53 percent. In the U.S., the Dow Jones industrials were fluctuating but stayed positive, up 53 points at the 12,270 level in early afternoon.

The selloff was more pronounced in Asia, with indexes in Japan, S. Korea, Singapore, Malaysia, India and Australia sliding more than 2 percent after Wall Street suffered its worst day Tuesday since the Sept. 11, 2001, terrorist attacks.

Japan's Nikkei 225 stock index tumbled 2.85 percent to 17,604.12, while Philippine stocks plunged 7.9 percent, their worst drop since 1997, at the height of the Asian financial crisis.

But several Asian markets also trimmed big early losses as the day progressed, though analysts warned that markets would likely remain volatile for a while.

"We don't need to worry about a big reduction from here, but this correction could continue for the next couple months," said Shinichi Ichikawa, an equity strategist with Credit Suisse in Tokyo.

Meanwhile, China's Shanghai Composite Index bounced back 3.9 percent to close at 2,881.07, rebounding from its 8.8 percent plunge Tuesday — its biggest drop in a decade — which triggered the global sell-off.

Bullish comments in China's state-controlled media appeared to reassure anxious domestic investors, who account for virtually all trading.

China will focus on ensuring financial stability and security, the official Xinhua News Agency cited Premier Wen Jiabao as saying in an essay due to be published in Thursday's issue of the Communist Party magazine Qiushi.

Authorities also denied rumors of a 20 percent capital gains tax on stock investments — speculation on which played a role in Tuesday's plunge.

But many analysts cautioned against focusing only on China's role.

"The selloff in equities cannot be blamed wholly on China. This is case of the market flying too close to the sun, and the hot money collapsing," said Torben Krogh Nielsen, an analyst with Saxobank. "It's a correction that's been seven months coming."

"If there's a larger message behind all this, it's that the era of cheap money is over and you can't blame China for that," concurred David Karsboel, head of market strategy for Saxobank in Copenhagen, Denmark.

Some investors used the drop as an opportunity to go bargain-hunting. Malaysian stocks, after falling as much as 8.2 percent, closed down 3.3 percent. Australian stocks closed down 2.7 percent after falling as much as 3.5 percent.

Many Asian markets were due for a correction after their recent spectacular performance, analysts said.

Benchmark indexes in China, Australia and Singapore had all hit records in February. Before this week's plunge, Malaysian stocks had gained 17 percent this year, while Philippine shares had climbed about 12 percent.

"A lot of that exuberance about just buying anything at all costs just starts to evaporate if the market has big falls like this," said David Halliday, associate director at Macquarie Equities. "I think the important thing to note is that this hasn't been triggered by an economic, financial or political crisis."
Japan's Chief Cabinet Secretary Yasuhisa Shiozaki echoed that sentiment, trying to quell concerns about the Tokyo market by stressing that overall fundamentals in Japan were still strong.