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Stocks Plummet On Barrage Of BAD Economic Data

Stocks fell lower on Thursday following the release of Federal Reserve regional reports showing sharp drops in manufacturing activity, and, as investors became increasingly worried about a possible credit-rating cut by a major bond insurer potentially setting off more problems for soured debt, stocks fell Friday, ending a volatile week. Meanwhile, investors have also had to digest an unfavorable report on American jobs.

It caps a week of losses overall. The Dow Jones Industrial Average fell as much as 300 points Thursday morning following early releases of first-time jobless claims, home construction data, and the Federal Reserve’s Philadelphia Manufacturing Index. 

The Dow was down 1 percent, over 300 points, while the S&P 500 fell 1.1 percent. The technology-heavy Nasdaq composite also fell 1.1 percent. The tech-heavy Nasdaq Composites dropped 1.5% on Wednesday.

Financial stocks fell 5.4 percent in the S&P 500, the biggest drop among the 10 industries making up the index. Some of the top indices fell by more than 2 percent, including the Dow Jones Industrial Average, which dropped by more than 300 points at times. The large swings in major indexes were probably compounded by computer-driven “buy” and “sell” orders, which kicked in when prices dropped far enough for some stocks to appear to be appealing bets, or for other investors to want out of Wall Street.

Thursday’s session, the latest in a string of triple-digit Dow plunges, showed a lot of the volatility that has sent stocks plummeting for a brief period of time since the start of the year. U.S. stocks ended the trading week on a lower note on Friday, marking the third straight week of losses for Wall Street, as about half the gains of the market’s summer rally faded.

Stocks were lower on Friday, as investors continued selling at year-end amid fears that recession is coming next year due to relentless Fed interest rate hikes. Stocks were lower this week after the Fed raised interest rates by 50 bps Wednesday, its highest in 15 years. U.S. stocks moved sharply lower all day on Tuesday, as investors continued to wonder if the pending Fed rate increase would really ease, amidst solid economic data.

Nearly everyone on Wall Street came into the week thinking that the Fed would raise the crucial short-term rate by  three-quarters of a percentage. This week’s selling picked up steam late Wednesday, after the Fed announced another rate increase and outlined expectations for many more increases later in the year. The Dow Jones Industrial Average (DJIA) rose over 300 points right after the increase, as investors latched onto phrasing in the news release indicating the Fed may soon take into consideration the effect the rate increase will have on stock markets, citing the optimism for a less hawkish agenda.

More importantly, it would mark the first time the Feds initiated the tightening monetary cycle when all of the leading indices (S&P500, Nasdaq Composite, and Dow Jones Industrial Average) were below their respective 200-day moving averages.

The S&P 500 has been falling this year as investors are concerned that the Feds aggressive monetary tightening measures may push the U.S. economy into severe recession. Fears about aggressive policy tightening sent stocks down from their four-month highs in mid-August. Since Federal Reserve Chairman Jerome Powell’s hawkish remarks about interest rate increases last week, the S&P 500 has fallen around 4% percent. The S&P 500 is down more than 3 percent since Friday, having tested its 200-day moving average as a barrier.

The S&P 500 fell 1.1% on Friday, and 3.3% for the trading week, while the Nasdaq Composite ended the day 1.3 percent lower, and 4.2% lower for the week. The S&P 500 lost 43.96 points, or 1.1%, finishing at 3,855.93 points, while the Nasdaq Composite lost 109.97 points, or 0.95 percent, finishing at 11,425.05. The S&P 500 fell 64.76 points, ending at 3,693.23, while the Nasdaq declined 198.88 points, ending trade at 10,867.93.

The S&P 500 was up 7.04 percent, with a plunge in global equity markets now leaving it with a 4.54 percent gain year-to-date; while the 9.64 percent increase in the Nasdaq Composite Index was reduced to 7.62 percent. The Dow Jones Industrial Average is now down 8.33 percent so far for 2008; so far in 2008, only 12 trading days have been spent, but frequent triple-digit losses for the index now force it to retrace the gains it made in 2007. 

Wall Street ended its worst week yesterday with a wild session, which saw the Dow Jones Industrials swing around within 1,000 points before closing in a relatively small loss, while the Nasdaq Composite Index actually ended in a small advance.

Images: Finviz

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