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Weak Numbers Cause Wednesday Slump

Aug 26 2010

Weak Numbers Cause Wednesday Slump

On Wednesday stocks fell after what was a disappointing report regarding durable goods which only added to the concerns people have about the current pace of the country’s economic recovery.

In trading, early this morning, the Down Jones fell about 34 points.  This has led nervous investors to try to again move their money out of the stock market and into Treasury bonds, which is driving interest rates even lower.

A rise in orders was lower than expected and followed a long string of other very disappointing economic reports for recent weeks showing that economic growth is slowing down more than had been anticipated.  Investors are becoming apprehensive ahead of an expected report later Wednesday regarding new home sales, which follows a report on Tuesday stating that sales for existing homes had fallen dramatically last month as well.

Major indexes have had a hard hit in recent days in the face of concerns regarding whether the economy is going to fall back into another recession or at the very least, end up stuck in a long drawn out period of extremely slow economic growth.  During its current losing streak, the Dow fell 3.6 percent over four days.

The Commerce Department has said orders for goods that are expected to last for at least 3 years rose only 0.3 percent in the last month.  This was far worse than the anticipated 2.8 percent growth which had been forecast by economists, in accordance to Thomson Reuters.

Apart from the volatile transportation area, order actually fell in July by 3.8 percent.  Economist had been expecting a 0.5 percent growth.

This weak report contributes to the evidence that there is a weakening in the manufacturing arena as the year goes on.  Manufacturing activity had been showing the most steady rate of growth throughout the first half of this year, but recent reports have shown that this growth is fading.

The Dow Jones fell 43.06 to 9,997.39, or 0.4 percent.  The Standard & Poor’s index fell 0.6 percent, or 6.19 points to 1,045.68 and the Nasdaq composite index also fell 12.39 points to 2,111.37, or 0.6 percent.

For every one stock that rose, there were about four stocks which fell according to the NY Stock Exchange; the volume was 62.5 million shares.

The yield for the 10-year Treasury notes fell from 2.49 percent to 2.45 percent, on Tuesday.  The yield of these notes is often used in helping to determine interest rates for mortgages and other types of consumer loans.

Many traders will be watching closely a report which is due out on Wednesday regarding the sales for new homes in order to see if it will confirm Tuesday’s data indicating that the market for housing is continuing to falter.  The report on Tuesday showed sales for previously occupied homes had fallen to a new 15-year low during July, which added to growing concerns about the possibility of the economy falling back into a recession.

In July the sale of new homes was rather flat in comparison to a month earlier, this according to Mr. Thomson Reuters.  Although, June sales did come back to 330,000 annual rate, which exceeded forecasts, after having hit a record low during May.

A new report from the Commerce Department is due to be released at 10 a.m. EDT.

The sales of homes have been especially weak ever since a tax credit for home buyers halted at the end of the month of April.  The high unemployment rate has kept many people from buying a home because people continue to worry about their jobs.  Many banks have also starting being extremely cautious when making any new loans after they took such huge losses from failed mortgages, in recent years.

While abroad, the FTSE 100 in Britain fell 1.1 percent, the DAX index in Germany fell 0.8 percent, the CAC-40 in France fell 1.5 percent, and Japan’s stock average, Nikkei fell 1.7 percent.

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