Wall Street plunged over 4.5 percent today as more bad news sparked a massive sell-off, suggesting that volatility is still king in the stock market. Investors have been uneasy over the near-term growth prospects of both the U.S. and global economy as the European Union continues to wrestle with its financial crisis. A trio of negative U.S. economic reports most likely encouraged today’s turn lower. The U.S. Labor Department said that unemployment benefits applications increased 9,000 to back over 400,000 last week. Economists had forecasted only a 1,000 increase. The number of people receiving unemployment benefits have been over 400,000 for 18 of the last 19 weeks. The department also announced that consumer prices also spiked up more than expected in July as well. The Consumer Price Index rose 0.5 percent, and core prices rose 0.2 percent for the month. Adding to the bearish sentiment today, the Philadelphia Federal Reserve said that manufacturing slowed in the Atlantic region last month, falling to the lowest levels in over two years. The probability that the U.S., and perhaps even the rest of the global economy, is returning to a recession was increased as Morgan Stanley (MS) economists cut their growth estimates and said the U.S. and Europe are dangerously close to contracting. Investors in fear of the seemingly impending downturn are once again fleeing to safe havens like gold and Treasuries. Gold surged past $1,800 an ounce as it continues to benefit from the market’s uncertainty. On the flip side, oil got pummeled by 5 percent, falling to $83 an ounce.
Major U.S. Stock Indices
DJIA: 11,005.95 (-3.55 percent)
S&P 500: 1,145.38 (-4.06 percent)
NASDAQ: 2,401.35 (-4.38 percent)
Russell 2000: 672.13 (-4.53 percent)
In other news:
- Hewlett-Packard (HPQ) is reportedly planning to spin-off its personal computer business and focus on software, starting with a $10 billion purchase of Autonomy Corp. With Dell (DELL) and HP both moving away from consumer-oriented strategies, could Apple (AAPL) be the biggest beneficiary? [Bloomberg]
- Exxon Mobil (XOM) is fighting the U.S. government over oil in the Gulf of Mexico, with an estimated one billion barrels of recoverable oil at stake. [Marketwatch]
- For investors, is it better to invest in companies that have a strong history of stock buybacks or dividend increases? [Motley Fool]
- Coca-Cola (KO) says it plans to invest another $4 billion into growing its China operations, and they aren’t alone. The world’s second largest economy is still expected to see a spike in consumer spending. [WSJ]
- Demand for gold is actually down 17 percent year-over-year, mostly because of an 82 percent drop in gold purchases in ETF-form like SPDR Gold Shares (GLD). [CNBC]
Check back for more news.