U.S. stock markets are tumbling today amid fears of a weakening U.S. economy. The Dow Jones Industrial Average fell 333 points by noon, a drop of 3 percent.
Fears of a double dip recession are clearly taking hold among traders and economists.
"The market is sending a strong and clear message that the U.S. economy is in a soft patch, the question is whether the soft patch is temporary, or something more serious," said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC.
Markets are reacting in particular to weekly jobless claim data from the Labor Department that shows the job market remains weak. In the week ending July 30, there were 400,000 new unemployment claims. This was a decrease in initial claims from the week earlier, but clearly not enough of a decrease to give investors confidence in the strength of the U.S. economy as whole. Jobless numbers for July are due out Friday morning before the markets open.
Fear about a spreading debt crisis in Europe are also contributing to the sharp market decline today. Last week's dismal GDP data and weak manufacturing data earlier this week are also among the factors inciting investors' worries.
The Dow managed to snap an eight-day losing streak by ending the day slightly positive on Wednesday. If today's major declines take hold the Dow will have ended the day lower in nine out of 10 days. It's set to be the worst losing streak for stocks since 2008.
On Tuesday, the Senate passed an agreement to raise thedebt ceiling and avoid a default on U.S. debt, following passage in the House on Monday evening.
"The initial increase of the debt limit by $900 billion and the commitment to raise it by a further $1.2-1.5 trillion by yearend have virtually eliminated the risk of such a default, prompting the confirmation of the rating at Aaa," Moody's stated in a report.
Moody's assigned a negative outlook to its rating, saying it could downgrade the U.S. if fiscal discipline weakens in the coming year, further "fiscal consolidation" does not take place in 2013, the economic outlook "deteriorates significantly," or there is an appreciable rise in the government's spending "over and above what is currently expected."
Fitch Ratings confirmed its AAA rating for United States debt over the short-term, but warned of more tough choices coming soon.
"While the agreement is clearly a step in the right direction, the United States, as in much of Europe, must also confront tough choices on tax and spending against a weak economic back drop if the budget deficit and government debt is to be cut to safer levels over the medium term," Fitch said in a statement.
On Tuesday, U.S. financial markets were first buoyed by the news of a possible debt limit deal in Washington, but slid after a report on manufacturing showed weak progress for the economy.
"Consumer and businesses rally need to regain some confidence and start to spend more if we're going to have a resurrection in the third quarter," Bruce McCain, chief investment strategist with Key Private Bank, said.
No comments:
Post a Comment