YAHOO [BRIEFING.COM] A sharp
sell-off in the stock market Monday snapped a five-session winning streak as
inventors digested a weak manufacturing survey, the possibility that the
Federal Reserve may buy longer-term Treasuries, word that the U.S. economy
officially entered recession in December 2007 and concerns regarding
financials.
The S&P 500 dropped 8.9%,
settling near its lows following a late session surge surge in selling
interest. Volume was slightly above the year-to-date average.
The decline was broad-based, with 498 of the components within the S&P 500
posting a decline.
The financial sector
(-17.0%) got hit the hardest. Oppenheimer analyst Meredith Whitney said
the U.S. credit card industry may cut credit lines by well over $2 trillion, or
45%, over the next 18 months, citing risk aversion, funding challenges and
regulatory and accounting changes. Whitney's opinion is well respected after
she correctly predicted much of the turmoil on Wall Street.
Weakness in commodities
(-3.6%), with oil dropping 9.5%, weighed on the energy (-10.3%) and material
sectors (-9.8%).
In economic news, Federal
Reserve Chairman Ben Bernanke said the U.S. economy remains under stress
despite the efforts of the Fed and other Policy makers. To help alleviate the
stress, he laid out possible further policy actions, including lowering the fed
funds rate, purchasing longer-term Treasuries or agency securities on the open
market.
The latter comment, along with
a flight-to-safety bid, sparked a rally in Treasuries, with yields of both the
10-year note and 30-year bond dropping too record lows. The 10-year note rose
48 ticks to yield only 2.75% and the 30-year bond rose more than four points to
yield 3.23%.
The November ISM Index, a
national manufacturing survey, declined to 36.2 from the October reading of
38.9. This was worse than the consensus estimate of 37.0 and, represents the
most contraction in U.S. manufacturing since 1982. The survey shows continued
signs of dropping prices, with the ISM Prices Paid Index declining to 25.5 from
October's reading of 37.0. The industrials sector dropped 8.5%.
The National Bureau of
Economic Research announced that December 2007 marks the end of a 73 month
expansion in the U.S. economy and the beginning of a recession. Assuming the
U.S. is still in a recession, the duration of decline the peak to
trough decline will surpass the recessions of 2001 (8 months) and
1990/1991 (8 months), marking the longest recession since 1981/1982 (16 months).
Black Friday sales were
better-than-feared. Depending on the research firm, sales were
up between 2% and 7% year-over-year. However, there are concerns that the
sales came at the expense of steep discounts and buying has since tapered off.
Retailer stocks dropped 9.3%.
In the end, the S&P 500's
decline of 80 points erased nearly all of last week's 96 point gain. The
index is up 10.2% from its multi-year low reached on Nov. 21, and down 44.4%
this year.DJ30 -679.95 NASDAQ -137.50 NQ100 -8.0% R2K -11.9% SP400 -10.9% SP500
-80.03 NASDAQ Dec/Adv/Vol 2353/416/1.95 bln NYSE Dec/Adv/Vol 2809/356/1.63 bln